The First Vice-President Mohammad Mokhber at the weekend announced the Cabinet's decision to boost the capital of the Central Bank of Iran by 28.748 trillion rials ($70.8 million) from the bank’s contingency reserves.
CBI’s capital should reach 98.143 trillion rials ($241.7m) from the previous 69.395 trillion rials ($170.9 million), IBENA reported.
The measure was approved earlier at the CBI's annual board meeting in November in the presence of President Ebrahim Raisi.
Raisi had instructed the CBI and commercial lenders to concentrate on streamlining regulations, improve lending and financial discipline, facilitate interaction with other countries and enhance investment.
He referred to bank overdraft as a major constraint hampering the struggling banking sector and called on the regulator to find effective ways to improve its performance.
The CBI should enhance supervision over bank financial statements and the performance of private lenders and oblige them to focus on funding cash-strapped production units.
"Efforts of the central bank and other economic entities must be anchored to economic stability, reduce investment risks, supporting production and boost payrolls.”
"These [goals] simply cannot be achieved by issuing decrees. The people and businesses must see results in practice," he noted.
Moving away from the US dollar, easing public access to loans, controlling inflation and money supply, and enhancing forex reserves were among issues the president discussed at the CBI meeting.
Higher CARs
Last month, the Cabinet approved a proposal for state-owned banks to raise capital and enhance capital adequacy ratio by allocating an estimated 350 trillion rials ($863 million) in new funds.
By increasing the capital of banks the government seeks to boost lending capacity and underpin support for production companies saddled with a variety of problems, namely funding constraints during high and rising inflation.
Per the plan, Bank Maskan and Bank of Industry and Mine will each boost capital by 100 trillion rials ($246.3m).
Bank Keshavarzi, Bank Melli and Bank Sepah are set to receive 35 trillion rials ($86.3 million) as part of the 2023-24 draft budget.
The Cooperative Development Bank is to raise capital by 30 trillion rials ($73.8 m). Post Bank Iran and the Export Development Bank of Iran will add 10 trillion rials (24.6 million) and 5 trillion rials ($12.3 million), respectively.
The measure should also help improve bank capital adequacy ratio to above 8%.
Government-owned lenders include three commercial and five specialized banks including Bank Melli, Bank Sepah and Post Bank.
Bank Maskan (main housing lender), Export Development Bank, Bank of Mine and Industry, Cooperative Development Bank and Bank Keshavarzi (agro bank) are the five specialized banks.
