Economy, Business And Markets

Banks Encroaching on Rice Market

Banks Encroaching  on Rice Market Banks Encroaching  on Rice Market

E conomists and state officials have commonly taken a dim view of excessive agricultural imports since it is contrary to the very premises of a Resistance Economy doctrine that has been hailed as the roadmap for sustainable growth and development relying on internal resources.  Among the key agricultural products is rice, whose farmers are in a constant state of agitation over concerns that huge imports could undermine their toil or even render it obsolete. The entry of banks in the rice import market, however, is now the farmers’ worst nightmare come true.

According to a report published by Banker news website on Thursday, some commercial banks have already become engaged in the rice market by establishing affiliated companies to import the product.

Although banks are legally allowed to allocate up to 40% of their assets for investment purposes, it appears that this has not been enough for some banks and hence they have been prompted to set up subsidiary companies to initiate their foray into rice imports, the report said.

 Long Reach

“When banks masquradeas companies, they can avoid the supervisory watch of the Central Bank of Iran which in effect gives them the power to conduct business with impunity. While in the past, banks were mostly involved in the real estate business, with the slowdown in that sector they have whetted their appetite for rice import,” an analyst told Tabnak news website.

The unnamed analyst added that due to the insufficiency of regular supervision, these subsidiary companies borrow money from other banks in order to fund their schemes. “It’s a case of banks scratching each other’s backs by lending to one another,” the analyst said.

 Going Overboard  

The average per capita consumption of rice in Iran is 36-37 kg, according to Jamil Alizadeh, the director of Iran’s Rice Association.  He says that makes the need for imports at most 600,000 tons annually but a government official said sometimes it can reach up to 2.1 million tons a year.  

“The current volume of rice import is about 3-4 million tons a year, which is almost 3.5 times more than the annual need,” Alizadeh said. The profit for importing every kilo of rice could be around $1, he added.

 Wicked Games    

Ezzatollah Yousefian, a parliamentarian, railed against the banks’ import profiteering, saying that this indicated banks’ refusal to be supervised by regulatory bodies.

“Banks are even manipulating the market through various means to keep the prices high. For instance, they offer their imported rice to a few large companies,” Yousefian said.

The MP expressed hope that the proposal calling for tighter supervision over banks and financial institutions, which has recently been approved in the parliament, would prompt the CBI to adopt a “more efficient stance” in overseeing banks’ businesses.