The Central Bank of Iran issued an update Saturday on interbank lending rates indicating that the rates are of the declining order.
It said the rate now is 17.95% down from 18.12% registered almost a week ago. The rate dropped by 1.65 percentage points in less than six weeks, from 19.6% on May 20.
Interbank rates fluctuated between 19.56-19.9% from mid-February to mid-May, according to CBI data.
If the trend continues, the downward slope is good news for the stock market as it could render investment in stocks more rewarding for banks and credit institutions. It also can weaken the possibility that the CBI may push up bank deposit rates to attract people’s savings into banks to control the high and rising inflation.
Decline in interbank rates is reportedly due to CBI’s policy to restrain supply of money in the interbank market in recent weeks. The CBI refused to give the so-called “structured loans” to applicant banks implying that they have sufficient liquidity. This caused banks to lend to each other at rates below the interest rate ceiling, a phenomenon seen as the main reason behind the decline in interest rates in the interbank market, according to the Persian-language economic website Eqtesad News.
Earlier Mohammad Ali Dehqan-Dehnavi, managing director of the Securities and Exchange Organization, called on the central bank to regulate bond rates to levels that don’t undermine the bourse and the appeal of stocks.
Irregular interbank rates in the last fiscal year led many to accuse the central bank under former governor, Abdolnasser Hemmati, of playing a role in the plummeting stock market by “manipulating interest rates”. A charge he strongly denied.
"As per CBI data, the average interbank rate dropped to 11.71% in May 2020 from 16.68% a month earlier. It further declined to 9.72% in the month to June 22 that year. This coincided with an unprecedented battering of the bourse.
Rates moved upward since to reach 14.79% in the month to July 22 before rising to 19.97% and reaching 22.63% by mid-October. However, rates have gradually declined.
While interbank rates were highly volatile throughout the previous fiscal year ending in March, it was 17.55% on average, down from 18.97% a year earlier. CBI numbers show that interbank interest rates were more stable in fiscal 2019-20 vacillating between 19.81% and 18.34%.
