The Central Bank of Iran said Sunday it has sacked heads of bank branches for flouting rules related to interest rates on deposits.
Las week the CBI said it was inspecting bank branches more closely to ensure they are offering interest in accordance with caps set by the Money and Credit Council (MCC).
In a press release published by IBENA, the CBI said some banks were also fined for violating the rules. It did not name names nor say which banks had been singled out.
The CBI though added that most banks are playing by the rules and that it would rigorously continue the inspections.
Former CBI chief Ali Salehabadi in the final days of his office late last month had spoken about the possibility of revising rates upwards to control skyrocketing inflation and lift the rapidly falling national currency.
The new CBI boss, Mohammad Reza Farzin, has made known that he supports the decision to raise deposit rates. The MCC, the top decision-making body of financial and monetary markets is still to officially announce the higher rates.
CBI's measures come after recent reports saying that some state-owned lenders were offering higher rates even though the it has not yet publicly approved the increase.
A report by EcoIran Web TV said some banks have raised interest on deposits by up to 25% and are charging between 24%-25% on loans from 18% in the recent past. EcoIran had quoted an informed source last week as saying that the regulator had plans to increase interest on deposits by 5%.
In mid-2020 the MCC increased interest rates on one-year maturity deposits by 1 percentage point to 16% and on two-year deposits to 18%. For short-term deposits with 3-month maturity it was hiked by 2 percentage points to 12%.
CBI has often warned lenders to play by the rules on interest rates or face prosecution. In a notice seen on the CBI website, the regulator said Wednesday that despite earlier warnings its investigations found that some banks resort to dubious ways to attract big money by offering higher rates on deposits and outdo their peers.
Addressing banks, the regulator said such “detrimental practices (higher rates) harm the national economy and business borrowers, increase the cost of money, violate the rights of beneficiaries and undermine the financial stability of banks.”
It warned that banks found in breach will see their branches shut, codes deactivated and restrictions on their physical expansion, balance sheets, credit and permission to offer forex services.
It called on the bank CEOs to “sack branch managers in breach before the regulator steps in”.
Bank CEOs met with senior CBI officials Thursday and pledged that “no bank would offer higher rates from Saturday”,
Banks' Coordination Council and the Association of Private Banks and Credit Institutions issued a joint statement last week stating that they would abide by CBI rules on interest rates.
The CBI recently allowed banks to raise rates on certificates of deposit (CDs) up to 23%.
CDs provide a fixed interest rate in exchange for the customer agreeing to keep a lump sum untouched for a fixed period. Usually the time limit is one year and if money is withdrawn sooner than agreed interest is cut as a penalty.
Media outlets interpreted the CBI move on CDs as opening the way for the much-debated higher rates.
