The Majlis Joint Commission on Tuesday made major budget decisions related to banking and the capital market. The commission is a key group responsible for reviewing the March 2022-23 budget.
Imposing limits on bond purchases by the Central Bank of Iran, delineating conditions for bank borrowing from the CBI and changes to dividend payments by listed companies were among the issues discussed by the lawmakers, according to the commission’s spokesman Rahim Zare'e, IRNA reported.
The commission banned the CBI from buying bonds issued either by the government or state-owned companies in the primary market.
The move was an amendment to Note 5 of the budget bill, allowing the central bank to trade in securities only in the secondary bond market. “This is in line with monetary policy,” Zare'e said.
Likewise, banks and credit institutions are banned from borrowing from the CBI unless they put collateral.
It was decided that the Money and Credit Council should determine the amount and type of collateral. As part of open market operation, banks put bonds as collateral to borrow from the CBI.
In collaboration with the Agriculture Ministry, the Industries Ministry is tasked with forming a taskforce comprising the Economy Ministry, Securities and Exchange Organization and the CBI to implement and expand “innovative solutions” to fund the supply chain.
The latter decision is in line with supply chain finance (SCF) policy recently announced by the CBI. In late December the CBI unveiled the SCF program with the expressed aim to improve lending efficiency and navigate bank resources toward production.
In particular, the budget has mandated the taskforce to define new “factoring and reverse factoring” mechanisms and expand existing ones to implement the SCF policy in an optimal way.
Factoring is a type of debtor finance in which a business sells its accounts receivable to a third party at a discount to meet its present and immediate cash needs.
Reverse factoring is a financial technology solution that mitigates the negative effects of longer payment terms to help buyers and suppliers optimize working capital. It reduces supply chain risk and improves cash flow by linking buyers, suppliers, and financial organizations.
Dividend Distribution
As per one decision related to the share market, all listed companies henceforth must deposit the share dividend directly into the account of shareholders.
Long demanded by retail investors, this move is expected to help them receive their dividend without the usual hassles. The same was promised by the stock market regulator, which has often said that it needs Majlis blessing.
Up until now, listed companies deposited the investors’ dividend per share (DPS) into accounts in selected banks, asking shareholders to approach their banks to receive the DPS and set timelines. In many cases, investors forsake the DPS to avoid hassles of going to bank branches.
“In case of noncompliance on the part of listed companies, they are fined 20% of the DPS value,” Zare’e said. Dividends and amounts are set by the board of directors of companies.
