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Banks’ Capital Increase Could Boost Recovery

Banks’ Capital Increase Could Boost RecoveryBanks’ Capital Increase Could Boost Recovery

The governor of Central Bank of Iran has advocated raising banks' capital as a strategy to make an exit from the recession and achieve economic growth.

Valiollah Seif said in an address to managers and staff of the Industry and Mine Bank on Thursday that the increase in banks' capital should primarily benefit small businesses and companies that have the biggest impact on the economy, ISNA reported.

He said during the past Iranian year (ended March 20), banks' lending to businesses surpassed $84 billion, showing a 44.5% growth compared with one year earlier. He added that 50% of the loans were granted to manufacturers.

The GDP (gross domestic product) share for the loans in the first nine months of the last year -- excluding the oil income -- has been 40%, according to the CBI governor.

"Although a 3.6% growth took place last year, some say they haven't felt the impact of that growth but even though the level of production is still lower than what it was in 2010 and 2012, with the support of the CBI the manufacturing sector is making a comeback," Seif maintained.

The bank's top policymaker further criticized viewing banks as the only lending institution for businesses, saying that other financing methods should replace banks for long-term financing of business projects.

 

Financialtribune.com