Growth in term deposits lagged behind sight deposits as more depositors park money for shorter periods in banks, recent data from the Central Bank of Iran show.
Total sight deposits reached 8,671.1 trillion rials ($27.9 billion) by end of the first calendar month on April.20, which was 47.3% higher from the same period last year. Term deposit rose 36.8% to reach 38,713.1 trillion rials ($124.8b).
Sight deposits had been the main laggard for months given the deep recession in asset markets but new data show a shift.
The fact that sight deposits are growing and term deposits losing pace partly indicates increase in inflation expectation. It appears that the tendency of savers to keep money for longer periods in banks has declined as depositors understandably anticipate higher returns on investment in gold, currency and stock marekets.
CBI data categorizes term deposits into long-term, short-term and Qarzol-Hassanah (interest-free) deposits. Short term deposits stood at 13,782.5 trillion rials ($44.4b) by April 20, up 32.9% on annualized basis. Long-term deposits rose to 20,629.8 trillion rials ($66.5b), up 36.4%
As per data, Qarzol-Hassanah deposits increased 42% in 12 months reaching 3,056.1 trillion rials ($9.8b).
Market observers say unattractive interest rates are the main reason why people are less enthusiastic in parking their savings in banks.
Despite mounting calls by economists to raise interbank rates as an effective solution to runaway inflation in many countries, monetary policymakers have so far resisted raising rates, arguing that it can potentially undermine the share market.
They also point to the dysfunctional banks as an impediment to raising rates, saying this will increase the cost of money and further hurt the already weak bank balance sheets.
Presently interest banks offer on deposits at best is less than half the annual inflation rates. Interest on one-year maturity deposits is 16% and two-year deposits 18%.
On short-term deposits with three-month maturity the rate is 12% and for six months 14%.
