Optimal allocation of bank credits, namely to the struggling SMEs, is important to get out of the recession, said the Governor of the Central Bank of Iran, Valiollah Seif.
In a meeting on ways to remove the impediments to business and manufacturing in Alborz Province on Wednesday, Seif said in order to embark on the path of economic recovery “we need to stop wasting bank credits.”
Noting that a special task force has been formed for this purpose, he said implementing the decisions made by this body will be binding for all lenders,” CBI’s website reported.
On the need for augmenting growth rates and contributing to economic betterment, the CBI governor said officials feel responsible, “but structural problems that have piled up over the past two decades” are a major barrier that has inhibited growth and made their task more difficult.
“Furthermore, banks’ assets being locked up in different sectors [and in the form of the high NPLs] mean that the banking system is hardly using half its capacity,” he said.
Financial Discipline
Referring to the Leader Ayatollah Seyyed Ali Khamenei’s vision regarding the role and influence of small and medium-sized enterprises (SMEs) in sustainable employment, Seif said there are currently 7,500 -10,000 inactive or struggling SMEs which the banking sector is trying to help get back on their feet.
“According to published data, 160 trillion rials ($5.24 billion) is needed to revive the ailing SMEs, which is not a big amount and the banking network must do its best to achieve this goal, in a disciplined manner,” he noted.
Expressing hope that the unification of forex rates could be announced in the near future, he said “discipline” and “wise policies” led to the huge decline in inflation (fom 40% in 2013 to 10 % in 2016) and the stability in the currency market.
No Limits in SME Financing
Resolving the problems of SMEs is one of the priorities in the fiscal year that began in March, Seif said. “As we have said before, the banking network is not facing any limits in financing such enterprises.”
In recent years most banks saddled with billions of dollars in bad debts and restructured assets have choked off credit to companies, namely the SMEs. Seif said identifying manufacturing units in need of funds is one of the duties of provincial task forces.
On plans and policies to lift manufacturing units out of the long and painful recession, he said: “In the current year lending restrictions related to SMEs indebted to the banking system were eased. In order to create a positive manufacturing landscape, repayment of debts less than 10 billion rials ($327,000) was extended for one more year.”
“We have strived to establish new refinancing lines in the post-sanctions era to get rid of the credit crunch and make up for the banks’ shortfalls.”
Also present at the meeting was Bank Melli Iran CEO Mohammad Reza Hosseinzadeh who echoed Seif’s remarks about SMEs. “Bank Melli, too, will lend to the SMEs with less than100 employees and do its fair share in contributing to economic revival.”
Regarding the much-discussed issue of interest rates, Seif said, “The CBI is doing all it can to keep the deposit rates within acceptable confines, which is a small margin with the inflation rate.”
“We have seen sky-high interest rates in the past few years, which were caused by the banks’ unhealthy competition to attract more savings. Now we want the banks to work in harmony with the CBI in this area,” he said without elaboration.
