Cabinet Decides on Bank Capital Increase, NPL Fines

Cabinet members have made decisions regarding increasing the capital of public-sector banks, repaying the government's debts and waiving loan repayment fines in their latest meeting on Wednesday.

Members of President Hassan Rouhani's Cabinet attended a session presided over by the president and noting that January 16 marked the first anniversary of Iran's nuclear accord, the subject was at the forefront of the meeting, IBENA reported.

The accord, officially known as Joint Comprehensive Plan of Action, was reached between Iran and P5+1 (the US, the UK, France, Russia and China, plus Germany) on July 14, 2015.

The ministers presented detailed reports about the openings created by the international accord in their corresponding sectors and the president obligated them to fully inform the public of their achievements.

The Cabinet members first approved that fines pertaining to non-performing loans will be waived for loans up to 1 billion rials ($28,178) "based on conditions and priorities set by the Central Bank of Iran".

Last week, the Coordination Council of Public-Sector Banks announced that it will waive late payment penalties for those who repay their loans by the end of the Iranian year on March 20.

Alireza Qeitasi, the council’s secretary, said the measure is in line with Majlis plans for removing the production sector’s hurdles and "aims to promote the banking sector and increase the bank's role in boosting employment".

The Cabinet also obliged the Ministry of Economic Affairs and Finance to allocate 200 trillion rials ($5.2 billion) of excess funds to increase the capital of the government in state-owned banks.

Officials had previously announced that the new amendments for the budget law of 2016-17 will contain measures to increase banks' capital and settle their debts.

CBI Governor Valiollah Seif had also advocated raising banks' capital as a strategy to make an exit from the recession and achieve economic growth.

The Economy Ministry was also bound to allocate 150 trillion rials ($3.9 billion) in order to reimburse a portion of the debts of the government to agent banks.

According to CBI data released in November, government debts to the banking sector jumped to 2.041 quadrillion rials ($63 billion) by the end of the sixth month of the fiscal year (September 20), marking a 17.4% growth from the beginning of the current Iranian year (March 20, 2016).