Economy, Business And Markets

Banks Want MCC to Drop Deposit Rate Ruling

Banks Want MCC to Drop Deposit Rate Ruling  Banks Want MCC to Drop Deposit Rate Ruling

Large commercial banks are demanding that the Monetary and Credit Council reconsider its decision to deregulate sight deposit rates, Akhbar Bank news website reported on Sunday.

It has always been the concern of state-owned banks that some private banks or uncertified financial institutions are prone to set exceptionally high interest rates. Last month's ruling by the MCC to lower the benchmark interest rate for one-year deposits to 20% (from previously 22%) further stoked fears that some financial institutions would defy the new rule.  

A later announcement by the central bank to allow banks to set their own rates for sight deposits was expected to promote healthy competition in the banking system, but has led to  dispute among bankers. Major state-owned or semi-governmental banks decided in a meeting on their own rates for sight and short-term deposits.

When asked if private banks have held a similar meeting to decide their own rates for sight deposits, Kheirollah Biranvand, the CEO of Bank Ayandeh, a private bank, dodged the question, saying "all the banks have had joint meetings with central bank officials and have reached a deal to keep interest rates low enough to support domestic manufacturing and entrepreneurship."

According to Binarvand, the banks agreed that short-term deposits with a daily return should remain 10%, but the 3-month, 6-month, and 9-month deposit rates would be decided by the board of directors of each bank.  

"Apart from the agreement on sight deposit rates, no other agreements were made neither between private banks nor state-controlled banks", Binarvand said, adding that this lack of agreement on other issues gave banks the power to set their own rates between 10% and 20%.

Abdolnaser Hemati, head of the state-owned banks' coordination council, however, said that major banks like Tejarat, Melli and Saderat have already agreed on the 3-month, 6-month and 9-month deposit rates.

"The fact is that some banks don't recognize the decisions made by the coordination council and have opted for deposit rates as high as 19.75% for some sight deposits, which will create a host of problems in the long run", Hemmati warned.

He further called on the MCC to address the issue, which he said would ultimately undermine the banks' lending ability.