30767
Lending Rates Should Be Cut
Economy, Business And Markets

Lending Rates Should Be Cut

As the Central Bank of Iran is preparing to submit a report to the Money and Credit Council on another interest cut, a finance expert has called on the two monetary authorities to shift their focus on lowering lending rates instead of deposit rates.
“Since productivity and cost of money vary in and among banks, productive banks could offer higher interests to depositors and minimize the gap between the lending and deposit rate. That is why the CBI and MCC should shift their attention toward lending rates instead of deposit rates,” Bahaodin Hosseini Hashemi told Fars News Agency. He added that “a deposit rate cut will only serve the interest of lenders and the real economy will never benefit from such measure.”
He said consensus among lenders to cut rates is unlikely as they struggle with structural problems. “If lenders agree to lower deposit rates to 18%, state-owned banks would have to comply and private lenders will (then) attract more deposits by offering higher rates.”
He went on to say “If the deposit rate is finally reduced to 18%, the inter-bank interest rate should be at maximum 20%+1% as common practice in other parts of the world where the inter-bank interest rate is an average of deposit rates plus one percentage point.”
He warned that inconsistent deposit and inter-bank interest rates will encourage the banks to attract deposits with 18% and then offer it in inter-bank market at 24%.
Approved deposit rates, in his opinion, are applied only to micro deposits that account for 90% of the total deposits in banks while “large deposits are offered far higher rates using various tricks.”
He noted that high lending rates are rooted in strong demand for loans and said “The banking system operates based on cash credits and that exerts pressure on their resources. In most parts of the world banks earn 50% of their income through service fees. In Iran, the figure is a paltry 10%.”

Short URL : http://goo.gl/Hj84Wz
  1. http://goo.gl/RBXhpM
  • http://goo.gl/0ET5KB
  • http://goo.gl/CQN2Nu
  • http://goo.gl/HMJYvf
  • http://goo.gl/HsulHD

You can also read ...

Iran-Afghanistan Trade Corridors to Bear Fruit for Both India, China
A strategic deployment of trade corridors is taking shape...
EIB Casts Doubt on European Plan to Salvage Nuclear Deal
The European Investment Bank’s global operations would be put...
India Says Iran Economic Ties Not Affected by US Sanctions
Less than three weeks before the first wave of US sanctions...
MTN Halts Iran Fiber Optic Investment
South Africa’s MTN has halted collaborations with Iranian...
Think Tank Recommends Ways of Overcoming JCPOA Challenges Facing EU
European efforts to keep Iran in the nuclear deal (formally...
Stocks Bow to Systematic Risks
Systematic risks have caught up with the Iranian stock markets...
Majlis Think Tank Calls for  Regulating Cryptocurrency
The research arm of Iran's Parliament has conducted a study on...
Warning to Banks Withholding Customer Data
The Iranian National Tax Administration’s special prosecutor...

Trending

Googleplus