Bank Loans Almost Double

Banks and credit institutions paid 16,060.5 trillion rials ($64.2 billion) in loans to businesses in 11 months since the beginning of current fiscal year that ends on March 20.   
The lending increased by 7,874.8 trillion rials ($31.4b) or 96.2% compared to the same period last year, according to data released by the Central Bank of Iran.
It said the loans registered unprecedented growth compared to the usual 40-50% in previous years. As is the norm, working capital loans topped the list with 9,740.7 trillion rials ($38.9b) accounting for 60.6% of the total. 
Working capital credit to business increased by 5,279.4 trillion rials ($21.1b) or a whopping 118.3% on an annualized basis. 
Companies involved in mining and industries were the main recipients of working capital loans at 3,662 trillion rials ($14.4b) representing 37.6% of total.
While part of the growth could be linked to inflation and devaluation of the national currency, inflation data suggests that annual lending was 50 percentage points higher than point-to-point inflation in the mentioned period. 
The CBI said the steep increase in lending is due mainly to corona loans to businesses as well as "general increase in banking resources and loans to brokerage companies in the stock market.   
The governor of the Central Bank of Iran said Tuesday that lenders gave 420 trillion rials ($1.68b) to businesses harmed by   Covid-19. 
The loans in eleven months were equivalent to half the money supply, according to Persian-language economic newspaper Donya-e-Eqtesad. The daily pointed to high inflation expectation and a negative real interest rate as the main reasons behind the upsurge in lending. 
"This made speculation in financial market attractive… under the circumstance where inflation was 40%, the winners where those who received loans at 20% interest," the newspaper wrote.
According to Donya-e-Eqtesad, total loans paid to stock brokers stood at 1,760 trillion rials ($7b) in the first 10 months of current fiscal year -- fourfold compared to the previous year. 
Factoring out Covid loans and credits to stock brokerages, the annual growth in lending could be reduced to 65.3%, the CBI said.   

Sectoral Share 

Apart from working capital loans, credits were given for creating and expanding businesses, repair and renovation and to first-time home buyers.
Banks lent 1,985.8 trillion rials for setting up new businesses, 1,809.9 trillion rials to expand businesses, 388.5 trillion rials for repair and renovation, 1,354.1 trillion rials for purchasing goods and 254 trillion rials to homebuyers. Miscellaneous loans amounted to 526 trillion rials. 
After working capital loans, establishing new businesses was the second priority with 12.4% and business expansion third at 11.3%. 
In terms of overall economic sectors, a big portion of banking resources went to the services sector with 6,296.8 trillion rials.   
The next major recipients were industries and mining companies with 4.878.8 trillion rials followed by commerce at 2,860.9 trillion rials. 
As always, agriculture and housing were at the bottom end. Farmers borrowed 1.1 trillion rials while homebuyers took out 914.2 trillion rials.