Term deposits increased at a noticeable pace compared to sight deposits indicating savers are now eager to park their money for longer periods in banks, the Central Bank of Iran reported.
Total sight deposits reached 1,127 trillion rials ($36.4 billion) by the end of the fifth calendar month to August 22 -- 59% higher on the same period last year. It was up 25.2% from the end of the last fiscal year in March.
Term deposits lagged rising 32.5% to reach 41,854.8 trillion rials ($135.6b) in the same period or a fifth of sight deposits.
Sight deposits had been the laggard for months due to the deep recession in asset markets. Now that seems to be changing.
Decline in term deposits is usually construed as a sign of rise in inflation expectation.
CBI data categorized term deposits into long-term, short-term and Qarzol-Hassanah (interest-free). Accordingly, short term deposits stood at 14,696.2 trillion rials ($48.3b), up 30.3% y/y while long-term deposits reached 21,893 trillion rials ($70.4b), up 43.1%.
Qarzol-Hassanah deposits jumped 40% in 12 months, reaching 3,659 trillion rials ($11.7b).
Despite mounting calls by independent experts to raise interbank rates as a way to contain runaway inflation, monetary policy and decision makers are reluctant to go too far too fast, arguing that it can hurt the already limping share market.
They recall the dysfunctional banking system as an impediment to raising rates, saying it could increase the cost of money and add to the problems of troubled banks.
Interest rates that banks offer on deposits at best is less than half the annual inflation. As per current laws, interest on one-year maturity deposits is 16% and 18% on two-year deposits. On short-term deposits with 3-month maturity the rate is 12% and 14% for six-month deposits.
Lenders were obliged in mid-April to give loans to new parents to help boost childbirth. The money is given to new parents who have a child in the previous fiscal year (March 2021-22) and after.
First-time parents are eligible for 200 million rials for the birth to the first child, 400 million rials for the second child, 600 million rials for the third, 800 million rials for the fourth child and 1 billion rials for five children and more.
Lenders are obliged to continue lending as Qarzol-Hassanah (interest-free microcredit) amid concerns about the detrimental impact of mandatory lending on banks.
Security deposit loans were announced by the government in 2020, as a coronavirus aid package for the large numbers unable to rent a home due to the historic increase in rents and home prices.
The government doubled marriage loans for this year. As per the 2022-23 budget, each partner who ties the knot is eligible for 1.2-billion-rial loan.
To help encourage early marriage, lenders are required to grant 1.5 billion rials per partner if the bride is below 23 years and the groom under 25.
Lenders are required to provide eligible applicants loans for renting a home up to 1 billion rials in Tehran City, 700 million rials in other big cities and 400 million rials for other urban areas.
