Economy Minister Ehsan Khandouzi has openly criticized banks for their inefficient approach towards financing the key production sector and called for redefining the role of the banking system in funding economic sectors.
"We need to make a major decision about banks in the Seventh Five-Year Development Plan. It is vital for a country that is saddled by [US] sanctions to make use of all its financing potential," Khandouzi was quoted as saying by the Economy Ministry's news outlet during a recent visit to southeast Kerman Province.
The Seventh FYDP has been drafted by the Planning and Budget Organization. Five-year plans are prepared by governments to help achieve sustainable growth. The sixth plan ended last year.
Economists and market experts say due to the myriad of constraints, not the least of which was international sanctions and mismanagement, the growth target in the last plan failed to deliver, except in the first year of the plan and a year after Tehran signed the historic 2015 nuclear deal with world powers.
“Some banks are seen as hurdles to decent growth and development. We believe that by addressing these issues we can and should accelerate our move towards achieving the set goals,” he said.
The minister noted that the current state of financing by banks is troublous, largely due to poor regulations and the imbalances in their financial statements. However, he said that the Central Bank of Iran is not responsible for the deficiencies, implying that fundamental reforms are paramount for redefining the role of banks in the economy.
The Raisi administration is determined to implement reforms in the key banking sector, he noted.
“Investments by banks must go into efficient sectors,” he said. “To this end banks must rewrite their strategies.”
The minister stressed that the goal is to encourage lenders to get effectively involved in funding not owning new businesses.
Transparency a Must
He recalled the importance of allocating funds to feasible business plans, criticizing lenders for insisting on putting money into elusive projects in past.
"Transparency in the banking sector is a must," he said, adding that "banks need to embrace innovation in their investments under the new policies and put a [permanent] end to non-banking businesses."
"Henceforth the premise for assessing the performance of state-owned banks will be their success in ending unrelated business activities," the minister was quoted as saying.
Earlier, the CBI chief Ali Salehabadi said goals anticipated in the Seventh FYDP should be realistic and accessible.
Speaking at a seminar on the next plan at the Majlis Research Center, Salehabadi said the long-term plan must be meaningfully different from the sixth plan.
“In previous plans there were big fissures between the set targets and what was realized.”
Salehabadi said the seventh plan must include clear-cut provisions for reforming the banking sector, fundamental change in the role of banks in funding the economy and bigger space for other financial institutions, namely the capital market.
“Given the limited financial resources, diversifying funding through the banking system, reviving the capital market and boosting foreign investment should be among priorities of the seventh plan,” the senior banker said.
“Iran’s economy is bank-based. We need to tap the financial capacity and potential of other sectors to realize development goals”.
The new economic roadmap should include provisions that are compatible with and contribute to reforms pursued by the central bank, he noted.
