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Lower Rates for Banks’ Investment Funds Infeasible

Lower Rates for Banks’ Investment Funds InfeasibleLower Rates for Banks’ Investment Funds Infeasible

It is not possible to pressure banks into lowering the rate of return on their investment funds, as the sector is not prepared for such measures, an official of the Monetary and Banking Institute said.

“Bankers lowered the interest rate for investment funds by 1 –2% and lower than what the Money and Credit Council decreed in the past 12 months. Currently, they offer a 20% return on investment funds,” Hussein Meisami was also quoted as saying by ILNA on Saturday.

Back in June, bank executives agreed to lower the interest rate of one-year deposits from 18% to 15%, which was approved by the council. However, banks started to offer higher returns through their investment funds in the stock market.

A survey by the website Rade.ir shows that banks are offering 17% to 22% interest on investment funds.

Bank Maskan and Bank Hekmat Iranian are offering the lowest interest on investment funds at 17%, while Middle East Bank and Bank Pasargad Iran are offering the highest interest rate of 22%.

“Cutting both rates [on term deposit and investment funds] is not a wise move at present, as it would decrease the total amount of money kept in the banking sector,” Meisami added.

The rate cuts seem to have impacted the total amount of term deposits kept in banks. CBI’s monthly data indicate a slowdown in the growth of term deposits in recent months.

The amount surged by 12.8% during the month ending October 21, whereas it grew by 17.7% during the same period of last year. The growth rate was recorded at 16% and 20.1% for the same period in 2014 and 2013, respectively.

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