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Ex-Banker Questions Call to Cut Reserve Ratio

Ex-Banker Questions Call to Cut Reserve Ratio Ex-Banker Questions Call to Cut Reserve Ratio

A former CEO of Eghtesad Novin (EN) Bank has questioned calls for cuts in reserve requirement ratio, saying the move could hurt the economy as it would add to money supply.

“The extra money which is to be injected in banks need to be channeled towards manufacturing units and industrial activities,” Mohammad Sadr Hashemi said on Wednesday as reported by ISNA.

His comments came a couple of days after Mohammad-Reza Nematzadeh, minister of industry, criticized the Central Bank of Iran for pushing commercial banks to set aside large amounts of deposits, known as the reserve-requirement ratio. The minister claimed he had personally written to President Hassan Rouhani urging him to help reduce reserve requirement ratio.

“Before increasing bank capitals or decreasing reserve ratio, officials need to make fundamental changes in the banking system first so that commercial banks can appropriately finance development projects,” Sadr Hashemi said. Cuts in reserve ratio can only prove effective if manufacturing, agriculture and other sectors are exploited to their full potentials; otherwise, the move will have inflationary effects, he warned.

Financialtribune.com