The Economy Ministry says creation of money by banks was cut by a third in the first four months of current fiscal year (March 20-July 22).
In a press statement seen on its website, the ministry said outstanding loans of banks and credit institutions grew almost 5.3% compared with the same period of last year.
“This is while in the first four month of last year, unpaid loans grew 16.5% on an annualized basis,” it said, adding that outstanding loans saw 67.8% decline or a third from last year.
The ministry linked the decline to stronger disciplinary measures, Shada.ir reported. “This shows that the policy of controlling bank balance sheets has delivered,” it added, referring to stronger measures initiated by the Central Bank of Iran last November to control the performance of banks, namely their dubious lending practices.
The regulator has imposed tougher punitive measures on dysfunctional banks and has warned them to get in line. With regard to controlling bank assets, the CBI is more concerned about unreasonable growth in loans given by banks and says assets like holding cash and bonds purchased from the government plus revaluation of assets are exempt from restrictive measures.
While the CBI has withheld release of lending data for months, financial statements of several banks listed in the stock market show their years-long questionable lending policies have taken a back seat.
Financial data of 11 banks show 10 reported less than 10% growth in lending in the first four months of the current fiscal year that started in March. Annualized growth in lending was even lower in five banks and was below 5%, the ministry said.
This is while nine out of 11 lenders registered double-digit growth in loans in the first four months last year including four banks with 20-30% rise in lending.
Bank Mellat, Bank Saderat Iran, Middle East Bank, Sina Bank and Eghtesad Novin Bank are among lenders that have significantly reduced lending.
For example, growth of outstanding loans in Bank Mellat dropped from 29.8% in the first four months of last year to 6.2% in the same period this year. The percentage fell from 18.7% to 3.4% for Bank Saderat. It dropped from 26.3% to 3.7% for Middle East Bank.
CBI disciplinary measures include setting higher reserve requirement ratio for banks with poor financial performance. Earlier, the Money and Credit Council allowed Central Bank of Iran to increase reserve requirement of weak lenders up to 15% from the maximum 13% in the past.
Raising reserve requirement of banks is seen as a punitive measure against unhealthy banks. Earlier in the week, Aliakbar Miremadi, head of the CBI Department for Health Assessment said the regulator has increased reserve requirement of nine banks with poor financial status, six in the past month.
