17195
High Collateral Threatening Micro Borrowers
Economy, Business And Markets

High Collateral Threatening Micro Borrowers

Unlike past practices, the Central Bank of Iran has decided to leave it to banks to decide the collateral required in return for micro-loans, causing fears that heavy collateral is awaiting small loans applicants.
The CBI’s decision came after borrowers made objections to the incompatibility of loan’s amount and the required collateral that was previously decided by the regulator.
The move, however, has now intensified the borrowers’ concerns as, even in the past, some banks used to act against the regulator’s instructions demanding relatively heavy collateral, according to an article published on Banker news website.
CEOs of banks argue that the heavy collaterals required in return for small loans were simply a precaution to avoid further surge in the size of non-performing loans (NPLs), which has now reached a worrying level – about $33 billion. The central bank, however, says the share of non-performing micro-loans is “insignificant”.
According to the report, the collateral demanded by banks is in some cases several times the value of the loan. For instance, an applicant of a 100 million rial ($3,000) Je’aleh -- or the small home renovation loan -- should provide the bank with a property as collateral.
The same holds true for other loans such as auto loan that has recently been increased to 150 million rials ($4,500), the report said. “Although the purchased car would remain under the ownership of the bank until the loan is fully repaid, at least two employed guarantors with banking checks are required by the banks,” the report added.  
Critics say accessing micro loans has become more difficult now, with the CBI leaving the decision on collaterals to banks.
“Applicants should pursue their case several times with the respective bank to finally obtain a loan. Big private and public banks are reluctant to pay such loans driving people towards smaller banks or financial institutions, some of which are unauthorized”, Mehr news agency said, citing a loan applicant.
According to another customer, banks in general act very cautiously when it comes to collateral. “Only regular clients do not face strict procedures. In most cases, it’s difficult for loan applicants to find the collateral the bank requires,” the customer said.

Short URL : http://goo.gl/M5aZkQ

You can also read ...

Europe May Tap Cryptocurrencies to Shield Iran Against US Sanctions
The European Union may opt for digital currencies in its...
Iran’s net hot-rolled coil consumption was 5.6 million tons in 2017, of which 0.8 million tons were imported.
Russia and Kazakhstan are temporarily stepping back on sales...
Secondary Forex Market: Corruption Loopholes Abound
Two goals set have been set for the recent establishment of...
EU foreign policy chief, Federica Mogherini, hailed the imposition of the blocking statute on Monday as a “consistent step forward”.
As it races to save the Iran nuclear deal, the European Union...
Deputy Economy Minister Defends Gov’t Forex Policy
The government’s policy to allocate dollars and euros to...
Hashtgerd Subway Station Construction Underway
Iranian authorities are pushing ahead with construction plans...
Colza Production Exceeds Expectations
The government has purchased more than 300,000 tons of colza...
Interbank Rate Tweak to Impact Interest Rates
Officials at the Central Bank of Iran have announced the...

Trending

Googleplus