Economy, Business And Markets

Competitive Leasing Interest Rates on Agenda

Competitive Leasing Interest Rates on AgendaCompetitive Leasing Interest Rates on Agenda

The Central Bank of Iran will soon submit a report to the Money and Credit Council that seeks to make leasing interest rates competitive, a CBI official said on Sunday.

“The existing interest rates are not reasonable for leasing firms and have sometimes led to their bankruptcy,” Vice CBI Governor for Supervision Hamid Tehranfar said in an address to a seminar held in Tehran with a focus on leasing and Resistance Economy. “The regulator seeks to lift some of the restrictions and improve competition in leasing interest rates.”

Thirty-five leasing companies currently operate in Iran and six requests are in the process to acquire certification, according to Tehranfar.

On the insufficiency of capital held by leasing firms, he regretted that the total assets held by these companies is around 60 trillion rials ($1.77 billion at market exchange rate). This accounts for only 1% of the money supply that hovers at 8.3 quadrillion rials ($245.78 billion).

“Leasing companies can act as a strong arm to the financing system. However, their total capital is too small compared with, for instance, Bank Melli—the largest commercial bank holding 1.84 quadrillion rials ($54.48 billion) in assets,” he said.

Tehranfar also noted that the total capital held by the leasing companies is half the production value of the two major automakers Saipa and Iran Khodro collectively.

Admitting that the nature of supervision over leasing companies is different from that over financial and banking institutions in the absence of deposits, he said “We expect leasing firms to follow specific and systematic regulations for receiving down payments from their clients.” Tehranfar asserted that the regulator should also play an effective role to improve the performance of leasing companies.

Mesbahi Moqaddam, a member of the parliamentary economic commission who was also present in the conference, proposed the leasing firms consider printing securities aimed at financing economic activities.

Head of Leasing Center of Iran, Habib Shirvani, another participant in the event, welcomed the draft amendment to the Interest-Free Banking Law, which will transform leasing companies to financial and credit institutions if approved.