30420
Appraisal of Lending Rates
Economy, Business And Markets

Appraisal of Lending Rates

Speculation over further cuts in interest rates has triggered a hot debate among analysts and experts on the rate conducive to growth and business environment.
In early November top banks reached a consensus to reduce deposit rates by two percentage points to 18%. Shortly after, the announcement was dismissed by Abdolnaser Hemati, head of the State-Owned Banks’ Coordination Council saying that the commercial banks are determined to offer the 20% interest rate approved by the Money and Credit Council back in April. The council, which is affiliated to the Central Bank of Iran, has deferred the decision to its next meeting.
Saeed Leylaz, an economics professor says “It is good to cut deposit rates while maintaining the lending rate. However, the banks will not benefit because dwindling deposits will weaken their lending power.” He also warned that low loan rates could encourage corruption.
The expert believes in the long run, saying lower deposit rates eventually reduce lending rate in parallel and called on the government to leave the decision to the banking sector as is the practice in most countries.
Meanwhile, he reiterated that uncertified financial institutions pose the real big threat to the struggling economy. “Uncertified institutions are not accountable to the central bank nor are they scared of the authorities. They can easily neutralize the government’s economic policies.”
On favorable interest rates, Reza Padidar, an industry representative in Tehran Chamber of Commerce, Industries and Mines, believes manufacturing should become more lucrative compared to investing or putting money in the banks. He regretted that “currently, the return on manufacturing is lower than 20% which means the bracket of return on industrial manufacturing activities falls between 10%-15%, too low to attract and encourage industrial ventures,” Eghtesadnews reported.
He called on the government to focus efforts on boosting production instead of protecting capital and said when production picks up, the banking system will regulate itself as industry becomes less reliant on its resources. “If and when this happens, interest rates are set by real supply and demand mechanisms of the market.”
Ahmad Sadeghian, a representative of the agriculture sector at the TCCIM also acknowledged that high deposit rates have caused problems for industry and manufacturing. “Optimal interest rates should be single-digit,” he said, and hoped that the policies adopted by the CBI to curb inflation at some point will help realize lower rates.
Reza Haji Aghamiri, the commercial representative at the TCCIM’s board of representatives said “Interest rates should be lowered to the extent possible. Now that the inflation rate is down to 15%, interest rates of 18% seem reasonable.”

 

Short URL : http://goo.gl/aDxmPO
  1. http://goo.gl/1BZrSz
  • http://goo.gl/bTSZ2H
  • http://goo.gl/5JnVSm

You can also read ...

Qatar, Oman Becoming Iran's New Trade Gateways
Iran is working to curb its trade ties with the UAE, replacing...
Connectivity Central to Iran-India Future Ties
Iranian President Hassan Rouhani’s recent state visit to India...
Exports to Thailand, Indonesia See Biggest Rise
Iran’s exports to Thailand and Indonesia, crude oil excluded,...
Renewed Efforts to Sideline US Dollar in Foreign Trade
Months after a meeting between Iran’s Leader Ayatollah Seyyed...
Shahid Rajaee Port’s Phase 3 Launch on Wed.
President Hassan Rouhani is scheduled to break ground on Phase...
SAIPA Mulling Options to Replace Pride
Reports from the SAIPA Group show that the second major local...
Rial Gaining Ground
Rial continued its gain against the US dollar in Tehran's...
Export Billet Prices Climb Amid Higher Offers, Transactions
Iranian export billet prices went up by $5-15 per ton on an...

Trending

Googleplus