Kosar Credit Institution has reemphasized the importance of government financial support for increasing the capital of commercial banks as crucial to energizing the banking industry.
“The burden of financing lies on the banking network which is suffering from a liquidity crisis; therefore, repayment of government debt to commercial lenders will significantly mitigate the problem,” Isa Rezaei, CEO of Kosar Credit Institution was quoted as saying by ISNA.
He called for banks’ freedom in providing loans and thereby absorb more investment in return without the CBI’s cumbersome restrictions –a practical strategy which could be effective in raising capital, he said.
Pointing to banks’ large deposits with the CBI – known reserve requirement – he said, “Banks’ monetary resources are parked with the CBI with no actual use. Therefore, to help improve the efficiency of the banking system, it would better for the CBI to release a portion of banks’ monetary resources to enable them to increase lending to both public and private production sectors.”
The government is planning to boost the production sector in the current fiscal year that started in March. However, lack of credit is a major hurdle for the production sectors as banks have choked off lending to companies and interest rates are seen as too high.
The CBI has announced that it plans to cut capital requirement levels for law-abiding banks as opposed to the unregistered lending institutions affiliated to and owned by vested interests.
