Economy, Business And Markets

CBI Trying to Rein In Unruly Quasi Lenders

CBI Trying to Rein In Unruly Quasi LendersCBI Trying to Rein In Unruly Quasi Lenders

Governor of the Central Bank of Iran Valiollah Seif says if unauthorized financial institutions fall in line and are systemized the CBI will move faster to “adjust” interest rates, the website Banker reported Friday.  

In a TV interview he referred to lenders’ continued struggle to meet the interest rate ceiling and enhance financial discipline and said the CBI has begun serious initiatives to organize the large number of uncertified quasi-banks and lending institutions aka the ‘informal money market’.

“These measures will encourage banks to comply with benchmark interest rates with ease and more confidence,” he said. It was not clear what measures had been taken on the highly controversial unlicensed bodies.

The top banker noted that the declining inflation rate and interest rates should be synchronized but said it would take “a good while” for the money market to adapt itself to the emerging situation.

He considered the decline in interbank interest rates a “positive sign” and hoped for “reasonable” rates in the banking system in the future.

Seif deemed the capital requirement for banks which is currently 4%, as insufficient and below international standards and said the standards expected of lenders do not match the capability of the banking system.  

“This should be a reason for reforming the banking system to empower banks to play an effective role in fostering economic growth.”  Seif also referred to other issues facing banks including bad loans that have piled over the past 10 years and the “compulsory loans” which considerably weakened banks’ lending power during the administration of former president Mahmoud Ahmadinejad (2005-2013).

“Another problem of the banking system is the massive government debt to the banking which along with other bad loans has drained 34-35% of bank resources,” he told state TV.