Economy, Business And Markets

New Bank to Reportedly Reimburse Mizan Depositors

New Bank to Reportedly Reimburse Mizan Depositors  New Bank to Reportedly Reimburse Mizan Depositors

After successive aborted attempts to compensate the victims of the collapsed Mizan Credit Institution, the Central Bank of Iran along with lawmakers have come up with a plan to establish a new bank to apparently resolve the problem.

Mohammad Esmailnia, an MP for the city of Kashmar in Khorasan Razavi Province — a region where Mizan was very active – referred to the non-viability of past  measures and said, “The Money and Credit Council and the CBI’s Informal Money Market Committee  have approved the founding of a new bank, to cover all of Mizan’s commitments,” IRNA quoted him as saying.

The new bank will work closely with Bank Saderat to put an end to the crisis that emerged when the uncertified lender was put out of business by court order in May.  

According to the lawmaker, private companies plan to start the new bank with a 30 trillion rial ($1 billion) initial capital. The CBI also will lend Saderat one trillion rials ($33.4 million) at 24% interest, which will be used along with whatever remains of Mizan’s assets to clear its debts to depositors.

Mizan was founded in 2001 in Mashhad in Khorasan Razavi Province. The institution rapidly emerged as a big-name lender attracting huge deposits especially from the eastern regions where agriculture, horticulture and dairy farming are major economic activities.

However, failing to get back the huge loans it had splurged on risky ventures on the one hand, and mismanagement on the other, led to its death in 2013. Since the company had refused to register with the CBI, it had to pull down the shutter leaving thousands of depositors in the dark not knowing how they would be reimbursed.

The former quasi-lender owes 2.5 trillion rials ($83.5 million) to its customers. As if this was not enough, it also has over 2 trillion rials ($66.7 million) in bad loans as do hundreds of government banks and credit/financial institutions, especially the uncertified companies that have long made a mockery of CBI laws.

Policymakers and the CBI’s top brass have long been facing the dilemma vis-à-vis such infirm institutions owned and operated by vested interests and whose number is said to exceed 6,000. The CBI and senior government officials have on a regular basis warned the people through the mass media to steer clears off the sickly lenders and put their money in officially recognized banks and financial institutions.