Bank Sepah and the Bank of Industry and Mine (BIM) collectively account for the than 56% of the total non-performing loans, during the last fiscal year finished in March 2023.
According to IRNA, the state-owned Bank Sepah solely accounted for 30.6% of the total bad debts, followed by BIM with 25.9% and Bank Saderat 8.2%. The Export development Bank of Iran, Bank Keshavarzi (agro bank) and Parsian Bank rank next.
This shows that state-owned commercial lenders and specialized banks are the leading source of non-performing loans.
Bank Pasargad, Bank Tejarat and Ayandeh Bank top the list in terms of non performing loans.
The Central Bank of Iran said the ratio of non-performing loans to total lending improved by the end of the first half of the previous fiscal year (March-Sept. 2022).
The ratio of NPLs to total loans stood at 7.8% by the end of H1 – down 14.7% from the corresponding period last year. Total NPL ratio, however, increased by 27.9% in the course of six months since the beginning of the fiscal year in March 2022.
NPL ratio is the ratio of the amount of nonperforming loans in the loan portfolio of banks to the total amount of outstanding loans. It measures the ability of a bank in receiving loan repayments.
The ratio in the report relates to both rial and forex loans. Data show that a big segment of the overall NPLs was in foreign currency.
Per available data, the NPL was 18.5% for forex loans, up 72.9% on the same time last year. For rial loans the ratio was 5.2%, down 8.8% compared to the year before. This is while it posted an 8.3% increase compared to the beginning of the year in March.
A loan is normally classified as nonperforming when payments of principal and interest are 90 days or more past due, or when future payments are not expected to be received in full.
According to the CBI, total outstanding loans (non-performing and performing) climbed 11,672.8 trillion rials ($33.06 billion) reaching 47,143.6 trillion rials ($133.5b) by last Sept -- 32.9% higher from the same period in the previous year.
With 28,057.1 trillion rials ($79b), Tehran Province topped the outstanding loan list. At the bottom end was Kohgilouyeh-Boyerahmad Province with 179.6 trillion rials ($508 million).
Ehsan Khandouzi, the economy minister, said during the recent Financial Industry Exhibition in Tehran that "The non-current rial claims of the banking network decreased from 4.8% in (Feb-March 2022) to 4.4% in March 2023."
Overall decline in the growth of bad loans indicates the relative success of the CBI and supervisory bodies in recovering bad debts, he said.
The CBI recently obliged banks and credit institutions to regularly publish the names of big defaulters in the hope that the move will help recover the billions in NPLs that have seriously undermined the banking sector’s lending ability and capacity.
Publicizing the name of big defaulters is backed by law that now obliges lenders across the board to update the list of borrowers on a quarterly basis.
NPLs of Iranian banks are often higher compared to their peers in the developing and developed world where it is mostly in single digits and usually below 5%.
A look at the NPL ratio of countries published by the World Bank indicates that in 2019 it was 2.5% in France, 0.9% in the US, 3.8% Poland and 3.1% Brazil. Turkey, Pakistan and Afghanistan that year registered ratios of 5%, 8.6% and 8.9%, respectively.
