$1 Billion Worth of NPLs Returned

Since a government scheme waived penalties for non-performing loans, a total of 40 trillion rials ($1.06 billion) worth of bad loans have been returned by the people, the deputy head of the Planning and Budget Commission of the parliament announced.

"From a total of 40 trillion rials worth of credit approved for the execution of this law to forgive penalties on bank loans, 15 trillion rials ($400 million) have been allocated so far," Hadi Qavami was also quoted as saying by IBENA.

In February, the Cabinet first approved that penalties for non-performing loans will be waived for loans worth up to 1 billion rials ($26,600). However, while the law is still in place in its original form, the Central Bank of Iran decided to implement it in a number of phases, as the resources required to implement it as per the original ceiling are not currently at hand.

That led to loans of under 100 million rials ($2,600) to be prioritized for penalty waiver, so it seems that a majority of the NPLs that have been recovered so far are in the form of loans.

As announced by CBI Governor Valiollah Seif in early May, the second phase of waiving late payment penalties for NPLs "will be implemented soon" and the ceiling will increase from 100 million rials to 250 million rials ($66,600).

According to Qavami, next phases will prioritize loans of under 400 million rials ($10,600) and under 700 million rials ($18,600), and will be implemented once the administration allocates a further 25 trillion rials ($666 million).

"NPLs under 1 billion rials amount to over 2.4 quadrillion rials ($64 billion)," he added.

The official said if 400 trillion rials ($10.66 billion) of credit are allocated to the scheme, the majority– 2 quadrillion rials ($53.3 billion)—of the NPLs will return to the banking system "but such resources do not exist at the moment".

As the parliament member notes, 25% of the allocated government credits were handed out to Bank Keshavarzi, the agent bank of the agriculture sector, while the biggest Iranian bank i.e. Bank Melli and Bank Tejarat received the rest.  

Qavami said people who had received agriculture and rural loans and "might not be able to repay them as a result of unexpected incidents such as drought and earthquake" are prioritized by the scheme.