The Central Bank of Iran on Wednesday announced new conditions allowing banks to return the assets of defaulters seized by banks and credit institutions.
As per a notice seen on the CBI website, the Money and Credit Council (MCC) approved the measure to help support defaulters who lost the ownership of their collateralized assets for failing to repay loans.
Those eligible must meet a number of criteria to be able to recover the expropriated assets and the value of the holdings must not exceed 100 billion rials, the CBI said.
Defaulters who own other properties cannot apply and borrowers also are required to settle their debts to the banks including penalties thereof all at the same time.
It is not clear whether the MCC ruling to this effect is open-ended or a temporary measure.
Lenders own an estimated 1,000 trillion rials ($2.8 billion) in non-financial assets, which have piled up over the years mainly due to impaired loans, bad debts, settlement of government debt to banks, branch closures and distressed investments.
Non-banking activities (owning real estate, businesses…) of almost all lenders have long been censured by prominent economists, analysts and senior government figures on the premise that it is a major hindrance to healthy and transparent banking that have resulted in negligence, mountains of bad debts and non-performing loans.
Earlier Economy Minister Ehsan Khandouzi reiterated the role and significance of feasible business plans and singled out banks for pouring billions into opaque projects.
Government demands on banks (to lend), tough procedural mechanisms plus the worsening economic climate have long impeded the sale of excess bank assets rendering the task almost impossible.
Selling excess assets reportedly imposes a heavy burden on banks and hurls them at the forefront of investigative bodies that determine whether or not their lending practices were in the framework of law and transparency.
Analysts concur that banks are reluctant in getting rid of the excess assets because when they do they must sell it to the production sectors that are not making profit under the present dire economic climate.
Banks own companies and upscale real estate and have set up special managerial boards to manage their assets. When assets are to be sold the boards will have to be dissolved. Experts have proposed creating a special office for this purpose to ensure that the task is undertaken by lenders per relevant procedures and mechanisms
Khandouzi said last month that private and state-owned banks have sold 670 trillion rials ($1.8 billion) in surplus assets since 2015.
“Shares in non-bank businesses accounted for almost half the assets and the rest was overextended real estate,” he said.
Bank Saderat accounted for 22% or 145 trillion rials ($408.45 million) of the sold assets, followed by Bank Melli 21% or 143 trillion rials ($402.8m), Bank Tejarat 110 trillion rials ($309.8m) and Bank Mellat 96 trillion rials ($270.4m).
Refah Bank with 48 trillion rials ($135.2m), Bank Sepah 47 trillion rials ($132.3m) and Bank Keshavarzi with 40 trillion rials ($112.6m) were the other lenders who shed excess assets.
The minister said progress in ending non-banking business is be the main criteria for assessing the performance of bank CEOs. “We met all CEOs to explain what can and must be done about selling such assets.”
