Economy, Business And Markets

Lenders Allowed Limited Non-Banking Operations

Lenders Allowed Limited Non-Banking OperationsLenders Allowed Limited Non-Banking Operations

The involvement of banks in non-banking operations should be allowed “to a defined extent”, the director of Monetary and Banking Research Institute said.

“Banks need to run subsidiary businesses if and when their usual banking operations are not profitable, otherwise they would make huge losses,” quoted Ali Divandari as saying on Sunday.

Noting that attracting deposits and offering loans are causing losses to the banking sector, Divandari added that “a portion of these losses should be compensated by [the banks' business] affiliates.”

"However, too much dependence on non-banking operations would be of high risk," he said.

“By putting huge money into other businesses, banks’ incomes would be affected by fluctuations in other sectors of the economy.”

In June 2014, Governor of the Central Bank of Iran Valiollah Seif issued a directive to banks and credit institutions, calling on them to come up with a three-year plan to float stocks of their affiliated companies to gradually end their non-banking activities.

As per the directive, banks are obliged to shed a third of their assets every year.