The process of merging two of five military banks and credit institutions with the state-owned Bank Sepah will be complete early next month, governor of the Central Bank of Iran said.
"Bank Hekmat Iranian and Mehr Eqtesad Bank are to hold a board meeting to finalize the merger in the next few days," Abdolnasser Hemmati said an In a note posted on his Instagram account on Sunday.
The remaining three banks will follow gradually.
In March 2019 the Central Bank of Iran announced the merger as part of a plan to reform the struggling banking sector and improve banking efficiency. The megamerger includes Ansar Bank, Bank Hekamat Iranian, Mehr Eqtesad Bank, Ghavamin Bank, and Kosar Credit Institution.
The measure is a follow-up to earlier moves by the Money and Credit Council – the main monetary decision-maker -- and the Supreme Council of Economic Coordination -- a body comprising heads of three branches of government created as per the instructions of the Leader Ayatollah Seyyed Ali Khamenei to help address major economic issues.
From what is known, 24 million customers have 2,150 trillion ($17.9 billion) in deposits with the five merging banks. Likewise, lenders have given 1,300 trillion rials ($10.8 billion) in loans.
Controlling Inflation
The senior banker also said that the Central Bank of Iran will publish a "framework for targeting inflation".
The goal is to help the CBI employ efficient monetary policies to keep the rate of inflation close to target rates, mainly through open market operations.
OMO is a financial instrument through which central banks buy and sell securities in the open market to expand or reduce money supply.
In the OMO framework, central banks buy government bonds to increase the money base (cash reserves) and by extension curb inter-banking lending rates. By the same token, selling government bonds decreases the base money and raises interbank rates.
The average goods and services Consumer Price Index in the 12-month period ending May 20, which marks the end of the second Iranian month, increased by 29.8% compared to the corresponding period last year, data released by the Statistical Center of Iran show.
SCI put the average annual inflation rate for the preceding Iranian month, which ended on April 19, at 32.2%.
Covid-19
Hemmati reassured the public about the plans to extend cheap loans to the businesses that have been hurt by the outbreak of Covid-19, "Banks are ready to give the money, and the process will start soon after the Labor Ministry provides access to applicants' data."
The CBI in March released a list of businesses eligible to take out the loans. It includes food industries and food distribution centers like restaurants, teahouses and related centers; tourism outlets such as hotels, inns, road recreation and service centers and other businesses identified by the Industries Ministry; air, rail and road transportation (inter- or intra-city and travel agencies; apparel production and distribution units; bags and footwear companies; distributors dried fruit, confectionaries, ice cream and juice parlors; sports and recreation centers, cultural and educational centers plus handicraft producers and distributors.
