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New Deposit Rate Compatible With MCC Policy

New Deposit Rate  Compatible With MCC PolicyNew Deposit Rate  Compatible With MCC Policy

The decision on Saturday by senior bankers to lower deposit rates by two percentage points as of November 22 triggered reactions from analysts and economists demanding confirmation from the Central Bank of Iran.

Speaking in support of the decision, CBI vice governor for banking supervision affairs, Hamid Tehranfar, welcomed the move and considered it in line with an earlier decision by the Money and Credit Council – the highest monetary policymaker - in April that voted to cut deposit rates from 22% to 20%, according to remarks posted on the official website of the regulator.

On the reasons behind the inability of the CBI to bring deposit rates in line with inflation rate, the senior official said “As the inflation rate declines, deposit rates too should be adjusted accordingly. However, chronic structural problems coupled with unhealthy competition among lenders are the main deterrents to the process.”

He did not elaborate on the structural problems the overall economy is saddled with for years, which has effectively inhibited growth and led to extended recession. One primary liability often pointed out by prominent economists and experts is the "command economy" in which the state/government owns and controls close to 85% of the economy including everything from oil to tobacco.

The official stressed the regulator’s determination to continue to monitor commercial banks to ensure compliance with the new interest rates and said “Several cases of violation are under investigation in relevant departments within the CBI.”

Financialtribune.com