Total outstanding bank loans rose by 5,712.5 trillion rials ($21 billion) to 21,801.8 trillion rials ($80 billion) by the end of the Iranian month to August 21.
That was 35.5% higher compared to the corresponding month last year, according to data released by the Central Bank of Iran.
During the five months since the end of last fiscal year (March 20- August 21), total unpaid loans jumped 12.6%.
With 13,941.9 trillion rials ($51.6b), Tehran Province as always topped the list. At the bottom end was Kohgilouyeh-Boyerahmad Province with total outstanding loans at 76.3 trillion rials ($282 million).
Likewise, deposits with banks and credit institutions increased 36.7% annually reaching 30,944.6 trillion rials ($114.6b) during the period.
Bank customers had 22,630.72 trillion rials ($83b) in deposits in the corresponding period last year. Deposits rose 13.9% compared to the end of the last fiscal year when the amount was 27,162.84 trillion rials ($100b).
As is normally the case, the majority of deposits were in banks in Tehran Province and held 16,771.4 trillion rials ($63b) in deposits or more than half the total. With almost 1,673.35 trillion rials ($5.12b) Isfahan Province was next.
Kohgilouyeh-Boyerahmad Province was last with 76.6 trillion rials ($315 million).
One of the main reasons for Tehran's top spot in both deposits and bad loans is that the sprawling metropolis is home to head offices of most businesses across the country, the CBI said. The concentration apparently gives rise to a whole lot of financial and banking requirements, including demand for loans, credit and other financial services.
Declining LDR
The loan-to-deposit ratio (LDR) fell by 1.6 percentage points in the month to August 20 compared to the same month in the last fiscal year to reach 77.7%, indicating that bank's deposits outweighed lending.
Compared to the end of the last fiscal year, LDR fell 1.7 percentage points. The ratio for Tehran and Kohgilouyeh-Boyerahmad Provinces was 90.9% and 111.2%, respectively.
LDR is used to assess a bank's liquidity by comparing the total loans to total deposits for a specific period and is expressed in percentage.
If the ratio is too high, the bank may not have enough liquidity to cover unforeseen fund requirements. Conversely, if the ratio is too low, the bank may not be earning as much as it should be.
LDR started declining from the beginning of fiscal 2018-19, dropping by more than 8 percentage points from 85.7% then.
Observers see the trend as one of the consequences of the negative real interest rates encouraging lenders to invest in parallel markets, such as the share and real estate market, instead of lending at rates that are below the annual inflation rate.
