Economy, Business And Markets

Banks Say Incentives Are Extra Burden

Banks Say Incentives Are Extra Burden
Banks Say Incentives Are Extra Burden

The much-publicized economic incentive package unveiled by the government last week relies heavily on the banking industry, a banking official complained on Sunday.

“It is rather unfortunate that banks should always carry the burden of economic problems while other sectors, including the financial markets, are spared,” Abbas Kamrei, a board member of Bank Melli, said, implying that the state-owned banks are already stretched out and cannot carry the extra responsibility mandated by the government to fix the limping economy.

He expressed the hope that the government would develop funding ways other than the money market and banks in the course of implementing the new policies, ISNA reported.

Noting that the resources envisaged in the new policy package to end the painful recession and increase consumer demand may not be sufficient, Kamrei remained hopeful that the reserve ratio requirement cut would “be realistic and different in substance from pumping strong money into the economy that eventually fuels inflation.”

On the effectiveness of “consumer empowerment policies” incorporated in the package, such as car loans, credit cards and debt purchase, which seek to stimulate demand for domestic products, he said it is likely consumers will be gravitated toward buying Iran-made products and lenders face a surge in demand for loans.

Participatory bonds are not new instruments in the world economy, he added, and said it is the interest rates on bonds that can, and will, make a major difference.

“If the interest rate is higher than the return on bank deposits or stock market securities, demand for bonds can be stimulated which would eventually help reduce government debts.”

He concluded that the new policy package is “rational enough” and could have a positive impact on the economy over the next six months if implemented efficiently and on time. It needs mention that the package officially has a lifespan of only six months, i.e. before the end of the Iranian fiscal year that ends in mid-March 2016.