First Vice President Is’haq Jahangiri called on the three branches of the government to help tackle the rising crisis of bad debts, with which the banking system has been struggling in recent years.
He discussed the issue in the 21st meeting of the Center for Fighting Economic Corruption held on Monday in Tehran, an event attended by the ministers of economy and intelligence, central bank governor, director general of Supreme Audit Court, head of General Inspection Office (GIO), and parliament members, according to IRNA.
Jahangiri highlighted the role of the Central Bank of Iran in supervising banks’ performance and addressing non-performing loans (NPLs), arguing that the CBI “cannot deal with the case singlehandedly.”
“If the CBI wants more authority in this regard, the administration can propose a bill to the parliament,” he recommended.
The official said he believes that some manufacturing units have in recent years been forced to stop production, a strategy that would help them avoid bigger loss due to the rising production costs. As a result, he said, the producers failed to pay their debt to the banking system.
He asked the anti-corruption center to come up with a “comprehensive plan” that could enable the struggling manufacturing units not only to repay their debt but also resume production, which could eventually help boost the economy.
“There are many leading domestic manufacturers forced by the 2012 currency crisis and the economic recession to shut down their production units,” he noted, suggesting that officials can reconsider the repayment procedure for such producers.
In 2012, the rial lost about 70 percent of its value against all major foreign currencies as a consequence of the intensification of sanctions against Iran over its nuclear energy program, among other macroeconomic reasons.
In its earlier meetings, the center, in collaboration with judicial authorities, had focused on identifying major debtors who owed massive loans to the banks. The officials had also tried to figure out the internal and external factors worsening the NPL issue. The CBI governor has announced a list of 575 individuals and firms whose debts collectively account for one-third of the entire bad loans.
According to the CBI statistics, toxic loans amount to 938 trillion rails ($32.8 billion at official exchange rate). The dangerously high amount of bad loans – mostly incurred by state-owned banks – has called the solvency of the financial institutions into question, and eroded their ability to lend, threatening the stability of the banking system.
