O ver the past month the Central Bank of Iran has kept close watch regarding banks’ deposit interest rates and three cases of violations were reported and sorted out over the period, CBI Governor Valiollah Seif announced on Monday.
In a meeting between the CBI and banking officials held on December 10, it was agreed that deposit interest rates be set between 10 to 22 percent effective Dec. 22. Banks were duly informed of the new regulations regarding interest rates and given a few days to send out the new bylaws to their branches, IRNA quoted the governor as saying.
CBI’s monitoring process started shortly after. Where cases of violations were reported by CBI’s inspectors, the regulator summoned the CEOs of the banks having failed to comply with the new regulations. “Most problems were sorted out after the talks,” the official stated.
The preliminary stages of implementing the new bylaws have been “satisfactory,” Seif said, adding that the first phase would focus mainly on communicating the new regulations to all branches of commercial banks. “Later, the implementation of the bylaw will also be closely monitored.”
The governor clarified that the CBI will by no means give the monitoring process a rest, stressing that “any further violations will certainly be attended to.”
Lower Interest Rates
He added that lowering bank interest rates shall not come about with mandatory measures, the regulator rather intends to provide the necessary groundwork to lower the rates proportionate to inflation.
The CBI decided in May 2014 to incorporate the banks in a bid to sort out the discrepancies surrounding the monetary market. Thus, the State Banks’ Coordination Council and the Association of Private Banks and Credit Institutions agreed to clarify maximum limits for deposit interest rates. Given the harmful effects of increased rates, the CBI welcomed the idea and mandated all banks and credit institutions to adhere to the new rates.
While official interest rates were set between 10 to 22 percent, many banks and financial institutions violate interest rate regulations to absorb more money in form of deposits. According to CBI reports, certain institutions would go so far as to offer interest rates as high as 27 percent on investment deposits.
The CBI, once again in November 2014, saw it necessary to call in senior bankers and recapitulate the importance of adhering to the maximum interest rates previously set.
According to the governor, 9-12 months deposits shall earn a 20 percent interest rate while 6-9 months deposits receive 18 percent. Interest on 3-6 months deposits are set at 14 percent. Also, interest on sight deposits will be based on the bearers minimum account balance during the month. Banks will pay 10 percent interest based on their minimum balance at the end of each month.
Any withdrawal from the accounts during the deposit period will cost customers 500 basis points in interest.
