Economy, Business And Markets

Hasty Moves Before Deposit Rate Cuts

Hasty Moves Before Deposit Rate CutsHasty Moves Before Deposit Rate Cuts

As calls are surging for tighter supervision over the financial institutions violating deposit rate regulations, some commercial banks are still hastily trying to offer higher deposit rates to attract more capital amid reports that the deposit rate ceiling is due to fall in a matter of weeks from 22 to 20 percent.

The central bank governor and his supervision deputy believe that most of the banks comply with the ceiling; however, media reports do not confirm their claim, ISNA reported.

Last year, the central bank, in coordination with commercial banks, decided that the rates must range between 10 percent for sight deposits to 22 percent for long-term deposits. But following reports of violation of the decision, the central bank once again emphasized on the agreed ceiling in a meeting with the bankers, which helped further regulate the market to some extent.

However, in recent weeks some banks and credit institutions have gone too far in promoting special deposit rates by sticking banners and announcements here and there, constantly violating the regulation, as they have been in financial trouble in recent years due to mismanagement and sanctions weighing on the banking system.

Some bankers believe that the recent hasty offers are an indication that the deposit rate ceiling is to be reduced soon. Therefore, they are trying to secure more deposits before long-term deposits lose traction in the public eye, ISNA said, citing a number of bank managers.

Depositors can rest assured that their deposits will continue to enjoy the current 22 percent rate for at least a couple of years (until the contracts expire), but when the ceiling drops to 20 percent long-term deposits will become less attractive.

Nevertheless, critics still believe that some banks will continue violating the rule unless the central bank takes effective supervisory and disciplinary measures.