Economy, Business And Markets

Businesses, Banks Try To Tackle Lending Woes

Businesses, Banks Try To Tackle Lending WoesBusinesses, Banks Try To Tackle Lending Woes

The Tehran Chamber of Commerce, Industry and Mining at the weekend hosted senior bankers as well as the former governor of the Central Bank of Iran to discuss lingering problems plaguing the financial sector.  

They met after Ali Sanginian, chairman of TCCIM, called for a session with the presence of bank officials, members of the capital market, and representatives from the private sector to sort out money and capital market issues, Eghtesadnews reported.

Mahmoud Bahmani, former CBI chief, said increasing the capital of banks should take precedence over every other issue and that should happen only through the injection of cash.

“Poor policies in the past increased the appetite of industries for bank loans,” he said. He regarded the government’s huge debts to the banking system a result of the country’s frail economy and noted that smuggling -- worth $22 billion per annum -- and declining oil revenues has paralyzed the economy, which he said renders the single exchange rate a distant dream.

Masoud Khansari, TCCIM chairman, pointed to the industries’ urgent need for cash and said, “Banks are also facing big problems in financing, but with continued discussions between lenders and private businesses it is hoped that solutions will be found.”  

Hossein Salimi, a member of TCCIM board of representatives, said banks alone should not be blamed for the funding and financing problems since lenders are on life support due to the bad debts.

“Banks attract customers by offering 22% deposit rates and 26% lending rates, leaving them to make ends meet with the remaining 4%.”

Mohammadreza Najafimanesh, a member of TCCIM board, noted that interest rates should be adjusted with the rate of inflation and urged banks to further cut lending rates for businesses.

Abbas Argun, a member of money and capital markets commission    called for strong action against uncertified financial and credit institutions, saying the unruly companies are a major obstacle in the way of banks to attract deposits.

Unauthorized financial institutions lure customers by offering high deposit rates.

 Barely Surviving

After the TCCIM members, officials from banks expressed concern and problems in financing manufacturing units.

Mostafa Beheshtirui, a board member of Bank Pasargad, said banks are barely surviving through their deposits. “As banks do not own all of their assets they cannot be blamed for venturing into non-banking activities.”

Ali Salehabadi, CEO of the Export Development Bank of Iran called for a decrease in interbank rate, which is 26% now.

“Manufacturers have borrowed most of the banks’ resources which is not feasible because cash injection does not necessarily improve market efficiency,” he said.

Big projects normally depend on funding from foreign exchange reserves with the National Development Fund of Iran as the main source.”  

Koorosh Parvizian, CEO of Bank Parsian, called for reform in usury-free banking law and said, “The Chamber of Commerce and counseling committees should convey their concerns and propose solutions to lawmakers, as the related law was drafted hastily.”

Parliament has announced plans to revise the current usury-free banking law which was passed in 1983. Overhaul of the banking system has emerged as a top priority of the Rouhani administration after years of mismanagement and absence of transparency took its toll.