The Central Bank of Iran has informed banks to employ three new criteria while deciding loan applicants' financial status in a bid to improve the efficiency of banks’ lending power and pull the economy out of recession without stoking inflation that is slowly nearing single digits.
According to a new CBI directive issued on Tuesday, banks are obliged to ascertain that at least 25% of companies' projects are financed by their shareholders to be able to qualify for loans.
Banks should also verify that a quarter of companies' assets, which would include the loan they are eligible to receive, are provided from shareholders’ resources, a CBI press said on Tuesday.
The new ruling requires large businesses to provide banks with financial records prepared by independent auditors. The auditors should be registered with the Association of Chartered Accountants.
The decree maintains that housing cooperatives are exempt from the new rules.
Housing cooperatives are formed by employees of organizations, companies and ministries to provide their members with low-cost homes. The cooperatives buy land from the government and construct apartments for their members. According to available data, an estimated 12,000 housing cooperatives are active in the country and have built and delivered 2.6 million housing units to their members.
The decree is in line with recent provisions of the CBI to ease lending conditions for businesses in dire need of financing and working capital.
In another decree this month the regulator announced that small and medium-sized businesses are allowed to take out loans even if they have unpaid debts and/or bounced checks. New terms are offered to SMEs active in agriculture, industries, services and production sectors. The CBI last month also required banks to provide new loans to businesses with up to 100 people on their payrolls.
Banks provide 90% of financing in Iran. However, in recent months they have come under heavy criticism for their lending policies and lack of transparency when it comes to opening the books.
