Economy, Business And Markets

Banks Poised for Resistance Economy

Banks Poised for Resistance EconomyBanks Poised for Resistance Economy

Central Bank of Iran governor, Valiollah Seif has called on banks to join the efforts needed to promote the principles of the 'Resistance Economy' recommended by the Leader Ayatollah Seyyed Ali Khamenei on the eve of the Iranian New Year (March 20).

The Resistance Economy is a set of principles outlined by the Leader to help bolster domestic production, curb dependence on oil exports, improve productivity and encourage Iranians to buy domestically-made products.

Addressing the nation on the occasion of Norouz, the Persian New Year, Ayatollah Seyyed Ali Khamenei said tackling economic problems is and should be a top priority, stressing that the Resistance Economy is key to addressing the economic ills that have plagued the nation for years.

 “This year is very important for the domestic economy and the banking sector should do more to help achieve the goals" set out in the economic plan of action, CBI’s website quoted Seif as saying at a meeting with bank executives late Saturday.

He had announced before the start of the new Iranian year that the bank will continue its policy to curb inflation and enforce fiscal discipline in the year ahead.

Unifying forex rates to restore stability to the market and supporting non-oil exports are said to be among the CBI’s priorities.

Improving efficiency and transparency in the money market and initiating structural reforms in the banking system are other top goals of the regulating body for the coming months.  Seif has pledged to continue reforming the CBI’s structure, assess the banking system’s health on a regular basis and enhance the much-needed financial supervision of  banks.

"Efficient use of limited resources is a key factor in implementing the goals of the Resistance Economy," the senior banker said, adding that, “Banks should focus on channeling resources to sectors that are efficient and contribute the most to the national economy.”

Seif told the banks to function in accordance with the central bank’s rules and regulations.

Interest Rates

On the controversial issue of fixing interest rates, he said “The banking sector is firm on lowering deposit/lending rates." He called on the state-owned banks to "take the initiative" to do so.

Banks agreed in February to cut their one-year deposit rate from 20% to 18% while the overnight deposit rate would be cut below 10 %. Following the decision, the Money and Credit Council – a decision-making body-- required banks to offer regular (non-Musharakah) loans and Musharakah (joint-venture) loans at approximately 20% and 22%, respectively. The council, earlier in April, had lowered the ceiling on lending rates to 22% and 24% – from a previous 27% to 28%.

In an interview with Mehr News Agency on Saturday, Seif reiterated that his bank's main goals in the new fiscal year include lowering interest rates and aligning it with the rate of inflation, and unifying the forex rates in the second half of the year.

“The inflation rate currently stands at 12%; therefore interest rates should be lower than the (presently offered) 18%,” he said, “Rates will definitely come down this year without the need to issue decrees.”

The central bank  succeeded in lowering the 40% plus inflation rate registered in October 2013 to 12.6% in February 2016 -- seen as a milestone in the government’s declared goal of checking inflation and bringing it into the ''single-digit” domain.