NPL Ratio Near Int’l Norms

The trend of Iranian banking system in recovering non-performing loans has gained momentum and brought the NPL ratio close to international standards, the chief executive of Export Development Bank of Iran said.

“The NPL ratio stood at 18% just a few years ago, while it’s now at 6% and this progress must continue,” Ali Salehabadi was quoted as saying by IBENA.

The main reason behind the improvement in NPL ratios was the Cabinet’s move in February for approving the penalty waiver for loans amounting to 1 billion rials ($28,178).

“This has led to the recovery of more than 1.6 trillion rials ($42.6 million) in bad debt as of mid-April,” Chairman of Majlis Planning and Budget Commission Gholamreza Tajgardoun announced.

Salehabadi noted that in the next few years, “we must move closer to international norms that put the NPL ratios at 5%”.

The Iranian banking sector’s ratio of non-performing loans stood at 11% by Sept. 20, down from 13.6% in Sept. 20, 2014.

According to a Central Bank of Iran study, immaturity of the capital market, insistence on using banks’ limited resources for solving structural problems of the economy and the internal workings of Iranian banks have largely contributed to the high rate of NPLs.