Head of the judiciary-affiliated General Inspection Organization of Iran (GIO) has ordered its inspectors to closely examine the performance of banks.
Zabihollah Khodaiyan underlined the need and necessity for the inspecting authority to look into key issues of banks and avoid getting preoccupied with anachronistic concerns, the GIO website reported.
He pointed to lenders’ oft-censured controversial role in non-banking activities and big dubious loans as major issue of concern.
“Why lenders should be involved in economic activities such as land and real estate, trade or building skyscrapers [must be investigated]. Such activities of banks has undermined the economy,” Khodaiyan rued.
Cumbersome banking rules, lack of effective oversight, bad corporate governance and failure to allocate banking resources fairly across the country and to defined productive sectors are among key issues plaguing the dysfunctional banking sector.
The official criticized lenders for giving most of their money to a limited number of borrowers, asking inspectors to dig into their lending practices and see determine if the big borrowers had put up the necessary collateral and guarantees.
“Data has it that barely 20 borrowers account for 80% of the loans given by private banks,” the chief inspecting official said. Names and details of these banks and the borrowers was not available.
As lenders are increasingly grappling with financial problems, the issue of big loan defaulters has attracted renewed interest of the public, media and economic experts.
The Central Bank of Iran in April published the names of big borrowers in state, semiprivate and private banks. It published a new report on Saturday updating names and adding new details.
The move is backed by provisions in the 2022-23 budget and the CBI is obliged to make public names of major defaulters and update it on a quarterly basis.
The problem of big loan defaulters is long said to be the biggest challenge of Iran’s ailing banking system. It has hurt bank balance sheets and forced many to stop lending despite the chronic need of businesses.
Total bad loans were estimated at 2,697 trillion rials ($8.9 billion) by the end of third quarter of the last fiscal year on Dec. 21.
