Deposits in banks and credit institutions increased by more than 5,500 trillion rials ($32.3 billion) in one year ending Feb 19, indicating 27.5% rise compared to the corresponding period a year earlier.
The deposits rose to 25,780.6 trillion rials ($151.65 billion) -- up 24.7% in the 11 months, according Central Bank of Iran data.
As usual, majority of the deposits were in banks in Tehran Province at 13,735.7 trillion rials ($80.8 billion) accounting for a little less than half the total deposits.
With more than 1,412.9 trillion rials ($8.31 billion) Isfahan Province was second.
Kohgilouyeh-Boyerahmad Province was at the bottom end with 69.1 trillion rials ($406.47 million).
Outstanding Loans
Total outstanding loans rose by 3,546.7 trillion rials ($20.86 billion) to reach 18,120.58 trillion rials ($106.6 billion) showing 24.3% hike by Feb 19 compared with the corresponding period last year.
With 11,469.6 trillion rials ($67.46 billion), Tehran Province topped the list with the highest outstanding loans.
At the bottom end was Kohgilouyeh-Boyerahmad Province with total outstanding loans reaching 66.7 trillion rials ($392.35 million).
CBI ascribes the high amounts of loans and deposits in Tehran’s banks to the fact that head offices of most businesses are located in the sprawling capital.
“This calls for a whole lot of financial and banking requirements, including rising demand for loans, credit and other forms of lending,” the CBI said.
Declining LDR
As seen in many recent reports, the loan-to-deposit ratio (LDR) fell gain to reach 78.4%, indicating an annual 1.8% decline.
The figure also shows 2.9% decline during the 11-month period (March 2019- Feb 2020).
LDR is used to assess a bank's liquidity by comparing the total loans to total deposits for a specific period and is expressed in percentage.
If the ratio is too high, the bank may not have enough liquidity to cover unforeseen fund requirements. Conversely, if the ratio is too low, the bank may not be earning as much as it should be.
Despite CBI recommendations to banks and credit institutions to balance the ratio, data of the past two years show overall LDR has been of the descending order, reflecting the increasing unwillingness or inability of banks to lend.
Published figures say the ratio was 85.7 in fiscal 2018-19. This shows it has declined about 7 points compared to the LDR in the present report.
The CBI said the LDR was not consistent across the region. For example, the ratio went as high as 101% in North Korasan Province during the month. But it was around in 56% Sistan-Baluchestan, 64% in Hamedan Province and 91% in Lorestan Province.
The ratio for Tehran and Kohgilouyeh-Boyerahmad provinces was 92.3% and 108.8%, respectively.
Such inconsistencies in lending and deposits compelled the regulator in March to demand provincial lenders balance their loans with deposits. It instructed banks and credit institutions to increase their loan to deposit ratio in each province by at least 50%.
"Banks’ total loans in every province should correspond with at least half their total deposits."
The central bank referred to reports from its provincial offices, saying that lenders’ performance indicates considerable imbalances between loans paid and deposits, especially in the underdeveloped regions.
