Economy, Business And Markets

NPLs Ratio Falls 2.4%

NPLs Ratio Falls 2.4%NPLs Ratio Falls 2.4%

The central bank’s deputy governor for supervision has announced that the non-performing loans ratio fell 2.4 percent to 12.6 percent in May from 15 percent in March 2014.

Hamid Tehranfar has rejected the claim made by the former central bank governor Mahmoud Bahmani that the ratio plunged to 15 percent from 30 percent during his term (September 2008 -13).

“Since the 1979 Islamic Revolution, the figure has never reached 30 percent,” IRNA quoted him as saying on Sunday. However, he noted, the ratio reduced to 14.4 percent from 15.8 percent over Bahmani’s term.

He considered toxic debts as a major setback for the banking system, saying that they would affect lending and lead to poor business performance.

“First, we need to identify loan receivers and force them to repay the principal and interest as soon as possible,” he said.

In recent months, the regulator has come up with stricter regulations to help banks recover non-performing loans that amount to 938 trillion rials ($33 billion at official exchange rate).  

As NPLs are increasing, banks would make less profit and face liquidity problems, the central bank official noted.

“Our main concern is that the pressure will direct banks towards deceiving their shareholders by providing obscure financial statements.”

On the interest rate cuts, he warned that banks and credit institutions violating the set rates will be disciplined. “If the central bank receives complaints from bank customers, it would bring the faulty entity to the court,” he said, urging all financial institutions to comply with the regulations.

Some banks are reportedly offering higher interest rates to deposits than those set by the Money and Credit Council. However Tehranfar said “that would be settled down in a matter of months as new policies need time to be completely implemented.”

Late in April, the MCC decreased the deposit rate ceiling (for one-year deposits) from 22 percent to 20 percent and set the lending rate at 24 percent, cutting it from 27-28 percent on April 28.