Abdolnasser Hemmati, head of the Coordination Council of Banks, said on Saturday that deposit rates, which decreased in April, will remain unchanged until authorities prepare for a second review of the rates.
Late in April, the Money and Credit Council said it would revise the deposit rates offered by commercial banks and credit institutions every three months, after it lowered the deposit rate ceiling, for one-year deposits, from 22% to 20% and set the lending rate at 24%, cutting it from 27-28%.
“Nonetheless, most of the banks still violate the limits, offering rates as high as 28% for one-year deposits in a move to attract more capital,” Tasnim News Agency quoted Hemmati as saying.
Iranian banks have been dealing with bad loans in recent years, a problem that has forced them to borrow from the central bank at 34% interest rate.
Hemmati believes that if banks adhere to the rules, they would lower their cost of financing to a large extent.
Shahin Shayan Arani, an economic expert, has also criticized the behavior of banks as “unhealthy” competition, saying, the central bank’s main policy is to achieve single-digit inflation, and offering higher deposit rates could end up in higher inflation.
Inflation is now hovering at 15%, down from once 40%.
He also warned depositors seeking higher interests against losing their money. “In terms of bankruptcy, the central bank will not accept the responsibility to compensate for any money loss,” he said.
Arani said some banks may even be engaged in very risky investment activities to raise funds to afford the deposit rates they offer.
“All business firms, including commercial banks, should define their executive guidelines based on economic facts, indices and parameters,” he said, calling on banks to adopt a risk management policy and help professional principles replace short-term benefits.
Top financial officials have called for restrictions on the banking system, in an attempt to improve lending. They seek central bank and judiciary’s assistance in closely supervising banking activities.
