Bank Melli is set to act as a mediator between the government and contractors that have undertaken government projects.
To pay part of government debt to the contractors, the largest Iranian state-run bank will sell 10 quadrillion rials ($344 million at official exchange rate) in Islamic government bonds, Bank Melli’s CEO Abdolnaser Hemmati announced on Monday. The treasury is expected to issue the bonds in the near future.
Hemmati said the nominal price of each bond is set to be one million rials ($34) with a settlement date of March 13, 2016.
“The bonds are tradable at the Iran Fara Bourse or over-the-counter market that controls up to 17% of the Iranian bond market,” Akhbar Bank news website quoted him as saying.
A government bond is a type of security issued by the state as a debt instrument.
The bonds are more liquid compared to other instruments in the financial market and are issued to help the government settle its debt to banks, contractors, insurance companies and social security organization.
Regarded as risk free bonds, they have a maturity date less than a year and are totally exempt from taxation.
“Bank Melli’s resources in the national currency have exceeded 100 trillion rials ($3 billion), indicating that public confidence in the bank has been growing,” Hemmati said earlier this week in a meeting with bank’s 600 executives.
The lender managed last fiscal year to lower the ratio of non-performing loans or NPLs to below 10%, a move that enabled it to give 350 trillion rials ($12 billion) in loan, registering a 60% increase compared to one year before.
Nearly 65% of the loans granted by the bank were raised through repayment of its bad loans, the official said.
