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Present circumstances do not bode well for higher banking interest rates.
Present circumstances do not bode well for higher banking interest rates.

Lenders Want End to Rate Cut Vogue

Lenders are pushing for a freeze on the rate cutting frenzy which has gripped the markets, asking the government, the Central Bank of Iran and the Money and Credit Council to let the rates proceed in a natural way

Lenders Want End to Rate Cut Vogue

Banks have no plans to lower interest rates and are lobbying with the regulator to keep the rates steady for now, said the head of the Association of Private Banks on Saturday.
“Lenders are pushing for a freeze on the rate cutting frenzy which has gripped the markets, asking the government, the Central Bank of Iran and the Money and Credit Council to let the rates proceed in a natural way,” Kourosh Parvizian told Mehr News Agency.
The MCC–CBI’s monetary policy committee–lowered the interest rates twice in the past five months, citing the significant drop in inflation as the main reason. Officials close to the decision-making body had hinted that another rate cut could be on the cards in the coming months.
“No new proposal concerning the reduction in interest rates has been made by bankers,” he said.
“This is while in the previous case, lending rates were cut in quick succession  after deposit rates were lowered which was mainly due to the pressure that the banks were subject to.”
The banker added that part of the current turbulence in the market stems from hasty decisions in lowering lending rates.
In a meeting on June 12, CEOs of private banks and credit institutions agreed to offer a maximum 15% interest on one-year deposits, down from the previous 18%. The move came after the Money and Credit Council–the top monetary decision-making body–failed to discuss the issue of interest rates at its meeting, giving banks space to set rates as they see fit.
Public-sector banks welcomed the move saying they would follow the lead of private lenders in lowering rates. The lenders, however, were later compelled by MCC to lower their lending rates by two percentage points as well.
Easing Pressure
Parvizian, who is CEO of Parsian Bank, elaborated on the dilemma of the rates, saying that relevant officials in the government, the CBI and the MCC have been solicited to help so that a part of the pressure currently felt by the banking system can be eased.
“Even on the eve of the last rate cut banks had to accept deposits at 18% so they cannot immediately move to lower loan rates,” he said. “That is because until July 2017, banks will still have one-year deposits at 18% and that is why they simply cannot further cut lending rates.”
The process of bringing down rates needs to be amended so that banks can find more room to maneuver and offer better services, he said.
On whether or not it would be possible for the rates to actually go up by 1-2%, he said the present circumstances do not bode well for higher rates. He emphasized that with the policies of the CBI, a hike in interest rates “would not be possible”.
Banks have routinely come under fire from private business leaders and business owners for their murky lending practices and bending the rules to charge customers hefty interests on their loans. Although banks have repeatedly demanded that the regulator not impose caps on interest rates, government authorities have demonstrated, in more wa

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