Economy, Business And Markets

Private Bank Lending Hits Big Time

Private Bank Lending Hits Big TimePrivate Bank Lending Hits Big Time

The latest report on banking shows that private banks maintained the top spot in lending from public-sector banks.

A central bank report indicates that in the two months to May 21 commercial banks and financial institutions' lending increased 25.5% compared to the same period last year. Whereas state-owned banks posted a 12.3% growth in lending, private banks and institutions marked a record-high 36.8% surge in their loans.

Out of the total 6.29 quadrillion rials ($216 billion at official exchange rate) lent as of 21 May, 3.7quadrillion rials ($128 billion) were offered by private banks and financial institutions and 945 trillion rials ($32 billion)   by public-sector banks.  

Interest-free loans comprised 5% of all loans given out during the two-month period which saw a 23.3% increase. Here, too, private banks and financial institutions won the first place by accounting for 68.3% of all interest-free loans.  

A significant portion of business loans were directed toward the manufacturing sector, which accounted for 38% of the funds spent on business development. Of that, 85% were used to help the operating industrial units—a priority for lenders.

The rise in lending, although encouraging, does not even distantly tap into the lenders' true potential.

Banks' capital assets have been depleted by bad debt and the effects of nuclear sanctions against Iran in recent years. Banks also face the dilemma of walking a fine line between injecting money into the economy and keeping a tab on a double-digit inflation, tackling of which is a top administration policy.