The Central Bank of Iran (CBI) holds 770 trillion rials ($28 billion at official exchange rate) of commercial lenders’ assets as reserve requirement.
Banks and credit institutions’ balance sheets indicate that in the first nine months of the current fiscal year (ending December 21, 2014) the amount of lenders’ reserve requirements with the CBI were 768.9 trillion rials ($27.9 billion), increasing by 1.5 percent compared to last year (March 20, 2014), when the amount stood at 757.5 trillion rials ($27.5 billion).
Compared to the same period last year, the amount witnessed a 20 percent growth, according to the latest CBI data.
Out of lenders’ overall deposits with the CBI, a considerable 744 trillion rials ($427 billion) are reserve requirements, increasing by 14.8 percent compared to the previous fiscal year. Nearly 24 trillion rials ($872 million) of the overall amount are sight deposits.
The high reserve requirement has resulted in decrease of financial resources for commercial lenders; consequently, their ability in providing loans has also substantially decreased.
Top economic executives and banking administrators have thus suggested that in order to properly tackle the issue, the CBI needs to reduce minimum reserve requirements so that parts of banks’ resources would be released and they’d once again be able to provide loans.
Nonetheless, CBI Governor Valiollah Seif had stated that for every one percent of decrease in minimum reserve requirements, liquidity would increase by 4.5 percent; insinuating that the inflationary effects of such an action would undermine efforts taken to control inflation in recent months.
Keeping things in perspective, it can be inferred that the CBI seemingly has for now no intention to decrease the reserve requirements.