Banker Expects Further Interest Rate Cuts

Interest rates in the Iranian banking system are expected to drop in the next Iranian year (starting March 21), said the chief executive of Parsian Bank.

“Higher government revenues and forex market stability are prerequisites for lowering the rates,” Kourosh Parvizian was also quoted as saying by Tehran Chamber of Commerce, Industries and Mines website on Tuesday.

“We are hopeful about further rate cuts in the next fiscal year, or else everybody is expected to help keep the rates around 15%, as set by the Money and Credit Council.”

Parvizian noted that banks’ lending rates would also be lowered after deposit rates come down.

Back in June, MCC allowed the banking sector to offer approximately 15% interest on term deposits, lowering the rate by 3%. Banks’ were also asked to charge borrowers approximately 18%, though bank loans are reportedly offered at higher rates.

However, the Central Bank of Iran has announced that it seeks single digit interest rates, approximately 2-3% higher than the inflation rate that is currently 8.7%.

Parvizian believes that there must be at least a 5% gap between the deposit and lending rates in the banking system, which is 3% at present.

“The banking system is not being supported at all. The sector is facing restrictions that are beyond the regulations,” he said.

The Parsian Bank CEO said the banking sector accounts for 90% of financing in Iran, which is a heavy burden.

“Banks need support for getting rid of non-performing assets, while borrowers need a better market to meet their commitments and regulations need to be improved,” he said, noting that lenders would be able to lower interest rates under these conditions.

“Normalization of international banking relations and attraction of foreign resources would also help lower lending rates,” he said.

Parvizian also called for more focus on capital markets for meeting the businesses’ need for finance.