The Central Bank of Iran and the judiciary are preparing a financial conviction record system to prevent the abuse of payment tools.
Mehran Mahramian, the CBI deputy governor for innovative technologies, said "the central bank has begun work on the financial conviction record platform in coordination with the judiciary," the news agency IBENA quoted him as saying.
Mahramian emphasized that with the assistance of the Statistical Center of Iran and Information Technology Department of the judicial branch, this service is being prepared for use in the banking industry and other needs.
The system is already in place for CBI platforms and its performance is being studied by the relevant CBI departments.
"By using the service, the possibility of abusing payment tools will be minimized and allocation of funds to individuals will be fairer," he said.
Furthermore, the official noted that by curbing non-performing bank loans the volume of liquidity in the banking network will improve, and thus a major harmful factor on the galloping inflation will be controlled.
According to CBI data, the ratio of non-performing loans to total lending improved by the end of the first half of the current fiscal year (March-Sep 2022). The ratio of NPLs to total loans stood at 7.8% by the end of H1 – down 14.7% from the corresponding period last year.
Total NPL ratio, however, increased by 27.9% in the course of six months since the beginning of the year in March 2022. NPL ratio is the ratio of the amount of nonperforming loans in the loan portfolio of banks to the total amount of outstanding loans. It measures the ability of a bank in receiving loan repayments.
The ratio in the report relates to both rial and forex loans. Data show that a big segment of the overall NPLs was in foreign currency.
Per available data, the NPL was 18.5% for forex loans, up 72.9% on the same time last year. For rial loans the ratio was 5.2%, down 8.8% on last year. It posted an 8.3% increase compared to the beginning of the fiscal year in March.
A bank loan is normally classified as nonperforming when payments of principal and interest are 90 days or more past due, or when future payments are not expected to be received in full.
NPLs of Iranian banks are often higher compared to their peers in the developing and developed world where it is mostly in single digits and usually below 5%.
Last year, the judiciary and the CBI signed a memorandum of understanding to facilitate information exchange and help detect and prevent fraud and financial crime.
As per the MoU, both sides were committed to set up interactive platforms and IT systems for registering and sharing information. Parties were to use the information to facilitate online inquiries, ease judicial processes for curbing banking and financial crime and protect bank customers and users of payment services against potential crime.
The MoU was to minimize paperwork and written correspondence and promote online interaction between the banks and courts. Online communication also helps ensure the veracity of information.
Later the judiciary issued a guideline on "Assigning Level of Access to the Financial Conviction Record System" in February 2022, in accordance with the Sixth Five-Year Economic, Social and Cultural Development Plan.
