Economy, Business And Markets

CBI Urged to Act on Interest Rates

CBI Urged to Act on Interest RatesCBI Urged to Act on Interest Rates

In a joint letter to the Central Bank of Iran, the CEOs of public and private banks asked the CBI governor to intensify the bank’s supervision over the performance of banks and credit institutions and the interest rates they offer, IRNA reported.

The Coordination Council of the Public and Private Banks and the Association of Banks and Private Financial Institutions held a session on Dec. 6 to examine the various interest rates set by the banks, according to the report.

The meeting concluded that the conditions under which interest rates on deposits are being offered by banks and credit institutions are “poor and chaotic”, noting that this is the reason why the banks have decided to write to the CBI.

The letter reminds the CBI that the maximum amount of interest for a one-year savings account was meant to be at most 22 percent.  

However, in the past three months, some unauthorized funds and financial institutions started to break the law by offering higher-than-average interest rates.

“Unauthorized institutions were followed by authorized banks and financial institutions, who began to violate the 22-percent interest rate,” in fear of facing a drop in their resources.

The letter criticized the poor supervision of the central bank over the performance of banks and credit institutions, saying that although the central bank is well aware of the issue, “it has taken no practical measures so far.”

As a result of the CBI inattention to the matter, the interest rate offered by different banks and credit institutions now varies between 22-30 percent.

Underlining the recent decrease in the inflation rates, the letter urged that the banks were expected to follow suit, going on to say that some banks and credit institutions still continue to ignore the rules and offer high interest rates.

As public and private banks make up a major portion of the money market, the letter insisted that the CBI intensifies its supervision on them by bringing discipline back to the money market, stating that “the central bank should not let the violating banks and institutions make problems for the economy.”

The letter added that the interest rates on deposits will increase in the long run, which will negatively affect the manufacturing sector while the economy is struggling to exit recession.

The letter concludes that CBI negligence would eventually make people lose trust in banks and credit institutions.