The Economy Minister Ehsan Khandouzi said banks need to focus on ways and means to strengthen the economy saddled with high inflation, rising prices, low productivity, joblessness, declining value of the national currency and inefficiency.
In his first meeting with CEOs of state-run and private banks, Khandouzi said bank resources should be used first to underpin the economic needs.
“What indeed is a flaw in the banking sector is direct involvement in business activity. Bolstering the national economy is, and should be, the [top] priority,” he was quoted as saying by the state news agency IRNA.
“Banks must step in wherever there is a need for financial resources,” the minister stressed.
An effective balance must be restored between banking as a profit-making institution and its role in boosting the economy, he added.
Khandouzi warned banks against giving the bulk of their resources in loans that could be used in speculative activities in asset markets.
While bank lending has reportedly increased substantially, economic experts and informed observers insist that it made little, if any, contribution to real economic growth as most of the money was pumped into speculative markets.
In the meeting Khandouzi reiterated the urgency to improve financial transparency and accountability of financial institutions, including banks and insurance companies.
Last month he obliged all government-controlled companies to publicly release their financial statements. “Obliging companies to publish financial reports is one barometer to assess the performance of managers of state-run companies,” he said.
Senior government officials have said reforming the inefficient and ailing structure of banks is a major concern of economic policy and decision makers of the Raisi administration.
Opaque rules, lack of strong oversight, questionable corporate governance and the failure to fairly allocate bank resources across the provinces and among verifiably productive sectors are among the strong criticisms made against the banking industry.
Weak balance sheets is another major issue with the troubled banks. Decline in lending power, deepening economic recession and galloping inflation are some of the major consequences spawned by the inefficiency and lack of vision of most Iranian banks.
