Economy, Business And Markets

Rouhani’s 2nd Term Banking Roadmap

Rouhani’s 2nd Term Banking Roadmap Rouhani’s 2nd Term Banking Roadmap

Following the banking policies implemented during his first term in office (2013-17), President Hassan Rouhani has once again urged the country’s banking system to follow a roadmap that directs its resources toward productive economic sectors and strives to pull out of their staggering recession without causing any inflationary effects.

The goal so far has been to utilize Iran’s full economic potential by providing working capital for productive units and boost their output, as the country begins its recovery from a painful economic recession.

One hundred days into President Rouhani’s second term, the Iranian banking system paid out loans worth 3.13 quadrillion rials ($76.48 billion) to nearly 5 million applicants in the first seven months of the current Iranian year to Oct. 22, marking a 12.6% growth compared with the same period of last year.

The share of working capital loans to stimulate industries and mines was 799.1 trillion rials ($19.49 billion), which equal 40.6% of all the credits extended to meet the working capital needs of businesses.

Industries and mines received 83.7% of their credits as working capital while they garnered a significant share of all the loans offered by the banking system to business sectors. All in all, the Iranian banking system doled out 1.97 quadrillion rials ($48 billion) as working capital loans to economic sectors during the aforementioned seven months, which indicate a 800-trillion-rial ($19.5 billion) or 8% growth compared with the same period of last year.

This is while President Rouhani underlined on Tuesday that Iranian banks require fundamental reforms to connect with global markets and be able to work with international banks.

“Some might have thought that what kept our banks from connecting to international markets was nuclear sanctions and issues surrounding the Joint Comprehensive Plan of Action (the formal name for Iran’s nuclear accord with world powers) but the truth is there are also other problems [banks] need to deal with,” Rouhani was also quoted as saying by IRNA.

The Iranian president also noted that many regulations are needed to resolve banking issues quickly, referring to the laws of Combating the Financing of Terrorism and Anti-Money Laundering as the latest bills approved by the Iranian Parliament.

This is while in line with the government’s policies, the Central Bank of Iran has started allocating 200 trillion rials ($4.87 billion) worth of loans to create new jobs.

As supporting small- and medium-sized enterprises is one of the main agendas of Iranian banking system, a total of 300 trillion rials ($7.31 billion) will be allocated to SMEs as loans.  

During his second term, the administration is striving to relegate major projects to the capital market, as it intends to render the country’s economy less bank-based.

Allocating loans to businesses in line with their performance, implementing further interest rate cuts, expanding the central bank’s policymaking tools, reducing the ratio of non-performing bank loans, cutting the reserve requirement for banks to encourage lending among law-abiding banks are other elements of the new administration’s banking policy.

The central bank is also determined to complete the implementation of International Financial Reporting Standards, along with the development of the nascent debt market.     


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