The Central Bank of Iran announced new rules on Sunday based on which banks and credit institutions are required to provide borrowers with access to lending contracts and changes thereto via electronic platforms.
Lenders have until next May to develop electronic platforms to launch e-platforms and develop existing ones.
According to a press statement seen on the CBI website, the platforms must enable borrowers’ full access to loan contract data.
Lenders are required to provide such access within one month after the lending contract is registered and submit a copy of it to the client.
The contracts must include data on all payments made by the borrowers, namely reimbursing the principal and interest on loans, lending fees, late fee, loan deferral, debt swap, etc.
The regulator said launching electronic loan contracts is in the framework of a broader legislation package, known as the “Facilitating Business Permit Issuance”, ratified by the Majlis last year.
Regulations oblige lenders to develop electronic platforms to ease borrowers’ access details about the provisions of the loan agreement with the bank and changes thereto.
The loan agreement must also be easily accessible to the guarantors and mortgagors, and include information about repayment, evaluation of the mortgage, granted deferrals and the likes.
Earlier, Mostafa Qamari-Vafa, the head of CBI’s public relations department, said such measures would help tighten control over bank lending, which has been under strong criticism, namely regarding big loans.
Lawmakers say the new rules will improve much-needed transparency in loan processing and is in the interest of borrowers.
The rules prohibit banks from demanding compound interest on loans, which is not allowed as per Sharia law. Compound interest (or compounding interest) is interest calculated on the principal amount, which also includes all the accumulated interest of previous periods of a deposit or loan.
While the Money and Credit Council earlier prohibited compound interest on loans, it was never put into effect in its desired format.
The new rules were passed following reports that lenders did not give borrowers access to their loan contracts, parts of which were often incomplete to be filled later by the bank as it deemed fit. In short, provisions of the loan agreements were apparently tentative and subject to change(s) by the lender.
