The Central Bank of Iran has required banks and credit institutions to increase their loan to deposit ratio in each province to at least 50%.
The new measure aims to help create a balance in lending across the country, a press release published on the CBI website said Saturday.
"Banks’ total loans in every province should correspond with at least half the total deposits in banks."
The central bank referred to reports from its provincial officials, saying that lenders’ performance indicates considerable imbalances between loans paid and deposits, especially in the poor and underdeveloped regions.
As per the press release, all banks are obliged to function as per the new regulations by March 2023.
Banks were told to take national and regional needs into consideration when processing loan applications.
Banks’ LDR stood at an average 78.5% by December 21, the CBI data showed. This was 2.4% down on a year-on-year basis and 2.8% lower compared to the end of fiscal 2019-20.
LDR is not consistent across all regions in the country of 83 million people. The ratio was 84% in Tehran Province as per the CBI report. However, it was 37% in Bushehr, 42% in Alborz Province, or 45% in Khuzestan.
LDR is used to assess a bank's liquidity by comparing total loans to total deposits for a specific period and is expressed in percentage terms.
Tehran in the Lead
According to banking data, deposits in banks in Tehran Province accounted for 53.8% of the total deposits. An estimated 13,295 trillion rials ($89.23 billion) in various types of deposits were parked in banks in the capital.
With more than 1,330.1 trillion rials ($8.92 billion) in deposits, Isfahan Province was second.
At the lowest end were banks in Kohgilouyeh-Boyerahmad Province with 65.4 trillion rials ($439 million).
With 11,164.5 trillion rials ($74.9 billion), Tehran Province topped the list with the largest amount of outstanding loans.
At the bottom end again was Kohgilouyeh-Boyerahmad Province with total outstanding loans at 62.8 trillion rials ($421.47 million).
Head offices of most businesses in Iran are in Tehran and this demands extensive banking activities, including the high demand for loans, credit and other financial facilities in the sprawling metropolis.
