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Interbank Rates Down to 17%

Interbank Rates Down to 17%
Interbank Rates Down to 17%

The latest measures undertaken by the Central Bank of Iran have had a positive impact on interbank rates, bringing them down from the previous rates of  over 20%, said the head of the Iran Chamber of Cooperatives and a member of Money and Credit Council–a decision-making body.

“Following the new decisions on reducing the bank deposit rates, concerns about the flight of short-term deposits from banks were effectively eased and was also met with a decrease in interbank rates to 17-18%,” Bahman Abdollahi also told IBENA.

About two months ago, the Central Bank of Iran issued a directive, obligating all banks and credit institutions to cap their interest rates on long-term deposits at 15% while offering a maximum of 10% for short-term deposit rates. The policymaker also decreed that if any long-term deposits are taken out of the bank before their maturity period is over, they will be treated as short-term deposits.

According to the official, in addition to CBI pursuing the policy of reducing bank interest rates in the two tenures of President Hassan Rouhani’s administration, “major businessmen in the country also wish for the rates to remain closer to the inflation rate” that currently hovers around 10%.

CBI has implemented its deposit rate reduction scheme and aims to target loan interest rates in the foreseeable future, but the head of the Chamber of Cooperatives notes that the possibility of banks losing resources must also be accounted for.

“A balance must be struck between deposit and loan interest rates so that the rates can be decreased further in proportion to the inflation rate while also maintaining the resources of the banks,” Abdollahi said.

The official noted that an acceptable stability has been established regarding interbank interactions and bank deposits, especially since CBI is currently transforming the debts and overdrafts of lenders into credit lines and giving it to them at a rate of 18%.

“I hope that the totality of these measures would cause all the rates to get closer to their real levels,” he said.

According to a central bank report on the interbank market performance in the previous fiscal year ending March 20, 2017, a total of 31,403 deals worth 30.95 trillion rials ($764 million) were conducted with interest rates ranging from 16% to 28% and an average rate of 18.67%.

 

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