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Toxic Loans Soar,  Reliable Data Still Lacking
Economy, Business And Markets

Toxic Loans Soar, Reliable Data Still Lacking

The total amount of NPLs or non-performing loans in the banking system is estimated at two quadrillion rials ($72.3 billion at official exchange rate), more than twice the minimum estimate of 950 trillion rials ($34.3 billion), said a top judiciary official on Tuesday.
Neither the central bank nor commercial banks have yet announced a precise figure for the NPLs.
“The yearend should be a proper time to deliver reliable assessments as to whether the amounts of NPLs have actually decreased,” judiciary spokesman, Gholam-Hossein Mohseni-Ejei, said, as reported by ISNA.
The definite amount of NPLs held on the books of Iranian lenders has always been shrouded in a haze of uncertainty and the central bank has never released a clear-cut report on the highly controversial subject.
Although diverse opinions have been put forth suggesting that the amount stands between 1.5  – 2 quadrillion rials ($54.2 - $72.3 billion), the central bank has never formally verified the amount and has rather said that according to available data the total amount of NPLs falls somewhere between 850 – 940 trillion rials ($30.7 - $34 billion).
Earlier, Ali Tayebnia, the minister of economy, stated that the total amount of NPLs is 1.5 quadrillion rials. However, he had a change of heart after he faced harsh criticism over his remark. The minister said later that the amount he announced included bad loans whose maturity dates had been extended.
Meaning lenders reschedule the due date on loans to make records healthier. If banks don’t use this legal loophole, they would have to write of these loans as losses. Even considering the least estimate on NPLs, their bulk would mean financial disaster. Incurred losses in such a scenario would be in excess of the capita of these banks and they would have to file for bankruptcy.
Former CBI deputy of legal affairs, Heydar Mostakhdemin Hosseini, said that the amount of NPLs are not a fixed figure and may even change on a daily basis. “The amount of NPLs is at least one quadrillion rials ($36 billion)” he said, adding that the figure would increase twofold if the bad loans maturity dates of which were extended are taken into account.
Even with conservative estimates bad loans constitute about a quarter of all loans given, which could technically make most commercial banks bankrupt. This situation has called the health of the financial system into question.

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