The loan-to-deposit ratio (LDR) of banks and credit institutions has been of the ascending order for four straight months, indicating a higher inclination to lend.
It was 82.8% by end of the month to Feb. 19, rising 1.7 percentage points on the same period a year before and up 2.6 percentage points from March 2021.
The ratio has been rising at a slow but steady pace since October 2021, when it stood at 81.4%, according to data published by the Central Bank of Iran.
LDR is used to assess a bank's liquidity by comparing the total loans to total deposits for a specific period and is expressed in percentage.
If the ratio is too high, the bank may not have enough liquidity to cover unforeseen fund requirements. Conversely, if the ratio is too low, the bank may not be earning as much as it should be.
Increase in LDR is an indication of banks’ willingness to lend. As per acceptable norms, the ideal LDR ratio typically is 80% to 90%.
A ratio of 100% means a bank loaned all what it took in deposits. It also means the bank will not have enough reserves for contingencies.
However, due to the week financial status of some banks and low capital adequacy ratios, Iranian lenders have been told by the CBI to keep their LDRs low to the extent possible.
The ratio for Tehran Province stood at 93.3%. It was 114.1% in the less privileged Kohgilouyeh-Boyerahmad Province as of Feb. 19.
According to the CBI, 52,422.5 trillion rials ($174 billion) in deposits were held by lenders in the said period, increasing by 15,366.2 trillion rials ($51b) or up 41.5% from the corresponding period a year ago.
Tehran Province topped the list with deposits at 28,139 trillion rials ($94b), accounting for 53.67% of the total.
Isfahan Province was next with 2,827.13 trillion rials ($9.5b) followed by Khorasan Razavi Province 2,238.07 trillion rials ($7.5b).
The report said during the period under review, outstanding loans exceeded 39,007.6 trillion rials ($130b), indicating a 44.3% y/y growth.
During the same period last year total outstanding loans were reported at 27,028.56 trillion rials ($90b).
Again Tehran was atop with unpaid loans crossing 23,884.1 trillion rials ($80b). Isfahan was next with 1,551.42 trillion rials ($4.7b). An estimated 1,335.94 trillion rials ($3.7b) in unpaid loans were reported in Khorasan Razavi province.
