Economy, Business And Markets

20,000 Apply for BMI Credit Cards

Valiollah Seif (L) says the plan for promoting credit cards aims to empower the demand-side of the market. Valiollah Seif (L) says the plan for promoting credit cards aims to empower the demand-side of the market.

Some 20,000 people have applied for credit cards at Bank Melli Iran within two days of the launch of the nationwide plan, according to the bank’s website.

According to CBI’s statement on Thursday, three types of credit cards will be offered, with a credit cap ranging from 100 million rials ($2,800) to 500 million rials ($14,000).

Cardholders will not be charged any interest if they clear their debts within a month, otherwise they will be given 12-36 months to settle their debts at a lending rate of 18%.

Even though all banks are required to participate in the plan, BMI is still the only bank that has agreed to issue the credit cards.

Central Bank of Iran Governor Valiollah Seif launched the plan during a ceremony at BMI’s central branch in Tehran on Sunday.

He warned cardholders against withdrawing cash from credit cards, “as it would be recorded as a negative score in their credit file”.

Credit cards are to be used only for making payments through point-of-sale terminal in shops and online payment gateways.

Seif added that the plan for promoting credit cards aims to empower the demand-side of the market, “which would help pull production sector out of the recession.”

 “We cannot expect the banking sector to start issuing credit cards quickly,” he said, noting that they would start issuing cards gradually.

Hossein Motamedi, EN Bank’s chief executive, said banks have developed a proper mechanism for issuing credit cards, although more time is needed for promoting credit cards since assessing applicants’ creditworthiness is a time-consuming process.

He believes that bankers cannot prevent the abuse of credit cards (like withdrawing cash from them).

“The plan would be a successful one, if 80% of total allocated resources are used for purchasing goods,” FNA quoted him as saying.

Motamedi noted that credit card can be used for purchasing any type of goods and services, “whether they are produced inside or outside the country”.

“We actually do not have the infrastructure for restricting the use of cards, like a database of cardholders and sellers,” he said.

Addressing banks’ reluctance in issuing credit cards, Abbas Argon, a board member at Tehran Chamber of Commerce, Industries, Mines and Agriculture, said CBI should provide resources to the banking sector, since they are also facing financial problems.

“The plan will fail, if we require bankers to use their own resources for issuing credit cards,” he said.

Argon noted that a surge in the rate of inflation is inevitable after providing the public with credit cards.

“The surge is needed for reviving the economy,” he said.