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Imposed Rate Cuts Unhelpful

Imposed Rate Cuts UnhelpfulImposed Rate Cuts Unhelpful

Imposed interest rates oblivious to the economic realities gives uncertified credit institutions an undue advantage over their law-abiding counterparts, said Mohsen Jalalpour, head of Iran Chamber of Commerce, the website banker.ir reported.

    He expounded his views by saying that when the Money and Credit Council aims at cutting interest rates by decree, law-abiding banks comply while the unruly financial instructions dodge the regulations and offer higher rates to attract savings and deposits.

    “This leaves the law-abiding banks little option but to also raise deposit rates to remain afloat. What ensues is unhealthy competition disrupting the market and causing the flow of deposits” into the lawless institutions.  

The senior representative of the private sector to the MCC defined a “good bank” as one with transparent balance sheets that plays by the rules. He said “bad banks” are those with “unclean” balance sheets that evade the rules.

Jalalpour noted that further rate cuts are necessary for creating a more business- friendly situation but stressed that the MCC is hesitant because its members believe all factors must be taken into account before making any decision on further cutting interest rates.

Financialtribune.com