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MPs Offer Solutions to Boost Capital of Banks
Economy, Business And Markets

MPs Offer Solutions to Boost Capital of Banks

Parliament members have put forth a new set of solutions for helping increase banks capital, while reviewing a long-waiting bill that seeks to remove obstacles hindering domestic manufacturing, ISNA reported.
Following decisions made during Monday morning's open session, the parliament granted the administration the permission to deposit two percent of the national budget with the treasury, which can in turn be allocated to boosting state-owned banks' capital.
To raise the fund, the government has the options to sell part of its capital assets and excess properties or increase utilities price for consumers whose consumption patterns are above the set standards.  
On the other hand, the parliament approved that banks will be required to provide loans worth minimum three times the amount the capital increase they receive. The loans must be offered with minimum five-year installment plans. Potential recipients of the loans are customers within the private and cooperative sectors that are willing to purchase national and provincial development projects. The list of the projects available for purchase will duly be announced by the Management and Planning Organization (MPO).
The National Development Fund of Iran (NDFI) will also be permitted to provide loans via commercial banks for the development projects.
The buyers themselves will have to be able to provide at least 20 percent of the resources needed for the completion of the plans.
Also, with the agreement of the MPO, the executive organizations overseeing the plans will have to sign long term contracts of at least 50 years, vowing to pay compensations for losses or to purchase the products and services that will be provided by the private and cooperative sectors once the projects are completed.
If, in any case, such a measure is unnecessary, the owners themselves will have the authority to sell their products and services domestically or abroad.
The MPO will also have authority to subsidize plans which are not at first deemed economically justifiable but could be profitable once losses are compensated.
The executive bylaw for these regulations will be ratified by the administration within two months after the regulations are formally announced. The MPO, NDFI, the Central Bank of Iran, as well as ministries of interior and economic affairs are responsible for preparing the bylaw.   
Lawmakers also put forward a set of solutions to reduce the amount of non-performing loans or NPLs. Namely, on request of debtors, the banks' assets will be formally evaluated by officials from the justice ministry or Farabourse, the Iranian over-the-counter market. To settle the debts, assets can be auctioned.

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