Private banks have a minimal role in confiscating real estate of business owners who defaulted on their loans.
“At present only 11 small and medium-sized manufacturing units are under the ownership of private banks,” Mohammad Reza Jamshidi, secretary general of the Iranian Private Banks' Association told IBENA, the news agency of the Monetary and Banking Research Institute.
“Four of the companies are open and managed by the original owners. Five were half-finished when seized by banks,” the senior banker said, emphasizing that confiscation by banks do not necessary lead to their closure.
Senior government officials including President Ebrahim Raisi have banned banks from appropriating factories and manufacturing units unable to repay debts.
Citing data published by the Iran Small Industries and Industrial Parks Organization (ISIPO), Alireza Qeitasi, the secretary of the Coordination Council of State and Privatized Banks, said earlier banks and credit institutions have taken over more than 1,700 properties from businesses that defaulted on their loans.
Reports last week said the most of the struggling companies were seized by state-owned banks.
Jamshidi reiterated that banks simply are not interested in seizing companies and properties. However, in some cases it is “the last resort to collect the pending debts because they [banks] also have to protect the interests of their clients.”
He welcomed the new action plan of the government to this effect, saying it would be successful only if the borrowers provide enough assurance about debt reimbursement.
He was referring to instructions of the Central Bank of Iran announced in late January outlining the conditions for banks to return ownership of seized property to the original owners.
Accordingly, banks and credit institutions are obliged to give back the real estate of manufacturers to the original owners upon their written request.
The mechanism can take the form of a rent-to-own agreement in which the original owner and the lender enter negotiations to determine the method of payment.
Also known as rental purchase, rent-to-own is a type of legally documented transaction under which tangible property, such as furniture, home appliances and real estate is leased in exchange for a regular payment, with the option to purchase at some point during the agreement.
Original owners can regain their property by reimbursing their debts either in cash or in installments. Under the install payment method, owners must reimburse at least 10% of their debt in cash. Considering 1 year grace period, the owner has to reimburse arrears to the lending bank within a five years.
Business owners whose properties have been seized by banks in the past 18 months can benefit from the provisions of the rules within six months of enforcement.
The CBI said that the new decision is in line with “government policy to help revive shuttered businesses and bringing them back to the production cycle.
Earlier the Economy Minister Ehsan Khandouzi said no manufacturing unit should be shut for non-payment of debts.
