Economy Ministry data show banks have been far from upholding the business ethic of equality in their lending practices.
Data published by the ministry news portal, shada.ir, indicate loan-to-deposit ratio (LDR) of specialized lenders owned by the government was the highest and private banks underperformed in accepting requests for loans.
The ratio is used to assess a bank's liquidity by comparing total loans to total deposits for a specific period and is expressed in percentage.
High LDRs mean that the bank may not have enough liquidity to cover unforeseen fund requirements. Conversely, if the ratio is too low, the bank may not be earning as much as it should be.
Accordingly, the ratio of specialized state banks was 126% on average until July 22. Semi-private commercial banks followed at 86% while the LDR of state-run commercial banks was 79%.
Average LDR of fully private banks and credit institutions was 63% -- almost half of the specialized government-controlled banks.
Maskan Bank (the main housing lender), the Bank of Agriculture, Bank of Industry and Mine, Export Development Bank of Iran and Tose`e Ta`avon Bank (Cooperative Development Bank) are the five specialized banks.
The ministry ascribed higher lending rates by specialized banks affiliated to the government to the fact that these lenders have other financial resources other than the people’s savings and deposits.
They have access to government credit and usually act as “agent banks” for allocating funds of the National Development Fund of Iran, the sovereign wealth fund.
Inconsistencies in lending is not limited to banks. There are big differences in LDR across provinces. For example, in Tehran Province, the LDR for specialized and commercial state banks was 128% and 89%, respectively, while it was 108% for semi-private banks and 78% for private banks.
LDR in the deprived Sistan-Baluchistan Province was 41% for private lenders, 53% for semi-private lenders, 62% for state-owned commercial banks and 100% for state-owned specialized banks.
In the reviewed month, the general LDR increased to 81.5% in late July, up 5% compared to the corresponding month last year. It was 95.1% in Tehran province.
Ideal LDR ratio is typically 80% to 90%. A ratio of 100% means a bank loaned to customers the whole amount it received in deposits. It also means that such banks will not have enough reserves for contingencies.
According to the CBI data, the total value of deposits in banks reached 44,285 trillion rials ($164b) by the end of the calendar month to July 22, up 44.8% on the same period last year.
Total outstanding loans, including both performing and non-performing, outgrew deposits and jumped by 11,287 trillion rials y/y to reach 32,353.4 trillion rials ($119b), posting 53.1% increase.
