Economy, Business And Markets

‘Compulsory Loans’ Decreased

‘Compulsory Loans’ Decreased‘Compulsory Loans’ Decreased

The research center of the parliament has attended the issues concerning compulsory loans –loans that commercial banks have been forced to grant in recent years – in next year’s budget bill, which is expected to go to the floor for a vote in few weeks, a new report said.

As compulsory loans would not allow for the optimal allocation of financial resources within the banking system, the amount of such loans has now slightly decreased in the budget bill for the following year, news website Banker reported on Wednesday.    

During the previous administration commercial lenders were forced by the government to give low interest loans, known as compulsory loans, to finance national projects or shore up bankrupt businesses. The cheap loans were offered to businesses which were not economically justified, critics say, leaving banks with rising non-performing loans.  

Vulnerable echelons of the society were to be the main eligible applicants of the soft loans. Loans were also given to newly-weds to promote marriage.

Banks were obliged to give more than 360 trillion rials ($13 billion) in compulsory loans, during the current fiscal year, ending March 20. But only 15 percent of the amount was provided in the first six months of the current fiscal year, according to CBI statistics.

The huge amount of compulsory loans has greatly undermined the banking system. Thus, regulations on the issue have changed and obligations of banks would be reduced in the budget bill.