The minister of economy and finance, Ehsan Khandouzi, said the government has fulfilled its promise and transferred surplus assets of banks to the tune of 580 trillion rials ($1.13 billion) by the end of the calendar year (March 20).
"This administration transferred more such assets in 18 months than the previous government did in four years. The government's plan to oblige banks to transfer surplus assets will continue until the end of 2023," newswires quoted him as saying.
Earlier reports said private and state-owned banks have sold 670 trillion rials ($1.8 billion) in surplus assets since 2015. Bank Saderat accounted for 22% or 145 trillion rials ($408.45 million) of the assets, followed by Bank Melli with 21% or 143 trillion rials ($402.8m ), Tejarat Bank 110 trillion rials ($309.8 m) and Bank Mellat 96 trillion rials ($270.4m).
Refah Bank with 48 trillion rials ($135.2m), Bank Sepah 47 trillion rials ($132.3m) and Bank Keshavarzi with 40 trillion rials ($112.6m) were the other lenders who let go of their assets.
The minister said that progress in ending non-banking business will be the main criteria for assessing the performance of bank CEOs. “We met CEOs of banks and informed them what can and should be done about selling the excess assets.”
Banks and credit institutions own an estimated 1,000 trillion rials ($2.8 billion) in non-financial assets, which have piled up over the years mainly due to impaired loans, bad debts, settlement of government debt to banks, branch closures and distressed investments.
Non-banking activities of lenders have long been censured by prominent university teachers and economists on the premise that it is a major hindrance to healthy and transparent banking that has resulted in the explosion of bad debts and non-performing loans.
Earlier Khandouzi reiterated the role and significance of supporting feasible business plans and singled out banks for pouring billions into opaque projects.
Need for Transparency
"Transparency in the banking sector is a must," he stressed, adding that "banks need to embrace innovation in their investments and put a [permanent] end to non-banking businesses."
Recently, the Majlis Research Center proposed amendments to rules to help ease the sale of excess assets of state-owned banks.
In a report seen on the MRC website, the influential body suggested that the government take responsibility of selling the assets. Per law, state banks are obliged to sell their excess assets subject to the decision of the head of their general assembly -- the economy minister.
The parliamentary report noted that the rules are pretty vague and open to wide interpretations, as it is not clear that the banks’ GE should decide which assets are not needed or should only allow selling the assets.
Law also requires lenders to use the money raised from asset sales for funding infrastructure projects or lend to profit-making enterprises.
The parliament’s research wing proposed revising the rules in ways that the government should be responsible for selling the bank assets if they (lenders) fail to do so within six months after announcing the revised rules.
"The government must transfer the proceeds to the banks immediately after the assets are sold…lenders must be obliged to use such funds to support business projects that are export-based and/or are labor-intensive."
The minister also addressed the recent increase in prices of goods following the elimination of the subsidized $1=420,000 rials exchange rate, stating that the plan had been delayed for several years and that the government had taken measures such as providing maximum subsidies to 90% of the population.
Regarding the implementation of the plan, Khandouzi said the Economic Coordination Headquarters had delegated the responsibility to the Planning and Budget Organization to design the operations based on the 2022 budget law to determine how to achieve the removal of the 420,000-rial subsidized exchange rate. The coordination headquarters oversaw the overall markets and monitored them on a weekly basis.
The government's decision to transfer surplus assets from banks and remove the subsidized exchange rate has been widely discussed and debated. As the deadline for the transfer of assets approaches, authorities have been taking steps to ensure that the process runs without disrupting the economy.
