CBI Targets for Next Four Years Outlined

The Central Bank of Iran will focus on managing banking interest rates and preventing a price war among other things for the four-year tenure of the next administration, the head of which will be introduced after the May 19 presidential election, the director of Monetary and Banking Research Institute said.

“The most important agendas of the central bank during the next four years include moving toward stable production and job creation, directing banking assets toward productive economic activities, maintaining a single-digit inflation rate and developing correspondent relations with credible foreign banks,” Ali Divandari was also quoted as saying by Banker.ir.

Bank interest rates are currently set at 15% following the decision made last June by private banks and the Monetary and Credit Council.

As announced last week by the director of the Association of Private Banks and Credit Institutions, Kourosh Parvizian, a further decrease in interest and deposit rates will be discussed when the banks convene their next joint meeting that could come as soon as next month.

Divandari noted that other major items on CBI’s agenda include continuing support for small- and medium-sized enterprises, reforming business models of banks, strengthening international banking collaborations, reducing the government’s debts to the banking system, boosting the interbank market and upgrading oversight infrastructures in the banking system.

“Banks help bankroll 91% of Iranian businesses while the capital market is responsible for the remaining 9%. This puts heavy pressure on the banking system while in most countries, capital and debt markets play an active role in financing,” he said, encouraging major companies to approach the debt market and issue bonds.

According to Divandari, CBI and banks have made considerable headway in promoting electronic banking in the past few years, which has significantly reduced the share of banknotes in daily transactions.

“This will play a part in reducing the operational costs of the banks,” he said, noting that the banking system is receiving miniscule fees while banking fees are a major source of income on the international scene.

  Escaping Gridlock

On the current stance of the banking system in the new climate after international sanctions were lifted following the implementation of the nuclear accord, Divandari said that in tandem with other economic sectors, the banking system “has exited a deadlock”.

He counted the single-digit inflation, reached after more than two and a half decades, taming forex market fluctuations, which was uneasy during the final months of 2016, reducing the ratio of non-performing loans over total loans, currently said to be around 10%, and mandating the banks to conform to International Financial Reporting Standards as goals achieved by the banking system and the central bank during the four-year tenure of President Hassan Rouhani.

“Improving the climate of doing business, strengthening safety of investment and increase Qarzol-Hasanah [interest-free] marriage loans” were touted by the official as further achievements.

On the other hand, First Vice President Es’haq Jahangiri has communicated the official assignments and prioritized projects for each government entity for the current fiscal year that began on March 21.

In his letter, Jahangiri, who is also the head of the Resistance Economy Headquarters, mandated CBI as the “agent entity” to implement a project titled Center for Controlling Credit Supervision.

Valiollah Seif, as the governor of CBI, has been obligated to prepare an “operational plan” for the project by the end of the current Iranian month on May 21 and submit the same to Jahangiri, and set in motion the measures required to complete the project on time. Furthermore, the CBI is ordered to provide regular reports on the progress of the project while the banking system has been specifically notified to cooperate with CBI that should coordinate with other entities to expedite the implementation of all joint efforts.