Surge in Private Banks’ Arrears to CBI Halted

The total arrears of 27 Iranian private banks and non-bank credit institutions to the Central Bank of Iran up to April 20 stood at 347.8 trillion rials ($9.2 billion), marking a drop of 9% compared to its previous month.

This is while according to CBI’s statistics, the volume of private lenders’ debts to the central bank surged dramatically during the last Iranian year (ended March 20, 2017).

A year-on -year comparison of the figure of  private banks’ debts to CBI till April 20, 2017, indicates a 165.7% leap, which happened when people took out their deposits in private banks, especially smaller ones in the wake of rumors of their bankruptcy.

Last year, widespread rumors in local, foreign and social media suggested that a number of Iranian banks are heading toward bankruptcy. However, many officials, including CBI Governor Valiollah Seif, repeatedly denied such claims, denouncing them as malicious efforts aimed at tarnishing the banking system’s reputation.

Mohammad Reza Jamshidi, the head of the Association of Private Banks and Credit Institutions, claimed that a number of major banks circulated these false rumors to absorb deposits in smaller banks by creating fear and anxiety among depositors.

But the situation changed when CBI intervened to reassure people that their deposits are safe as those up to a ceiling of 1 billion rials ($26,600) are guaranteed by the Deposits Guarantee Fund of Iran, “and the rumors lost steam”.

According to CBI’s latest report published on its official website, commercial banks’ debts to CBI till April 20 reached 177.3 trillion rials ($4.7 billion), marking a drop of 4.9% compared with the corresponding period of last year.

However, the figure indicates an increase of 47.4% compared to the previous month that ended on March 20.

The total volume of six state-run specialized banks’ debts to CBI by the end of the Iranian month ending April 20 stood at 484.9 trillion rials ($12.9 billion), which marks a YOY drop of 14.1%. The figure also dropped by almost 2% compared to the previous month.

 Deposits

The private sector’s deposits in the Iranian banking system as of April 20, 2017, reached 12.3 quadrillion rials ($328 billion) to register an annual increase of 24.3%.

Private banks and non-bank credit institutions absorbed 71.3% of the entire volume of people’s deposits in the banking system. The figure reached 8.7 quadrillion rials ($232 billion), which is up 22.5% YOY.

Commercial and specialized banks owned 18.7% and 9.8% of the deposits, respectively.

The lion’s share of deposits were in the form of non-sight deposits that accounted for 90% of the total volume at 11.1 quadrillion rials ($296 billion), up 24% YOY. Sight deposits absorbed only 1.2 quadrillion rials ($32 billion), constituting 10% of the total sum.

The total volume of banks’ reserve requirements in CBI also witnessed an annual growth of 21.4% and reached 1.25 quadrillion rials ($33.3 billion), as a result of the establishment of new banks and credit institutions, and the significant recapitalization of state-owned banks.

However, banks’ sight deposits in CBI declined by 32.2% and stood at 61.3 trillion rials ($1.6 billion).

 Foreign Assets

Data released by CBI for the month ending April 20 put  banks’ total foreign assets at 5.7 quadrillion rials ($152 billion), marking a decline of 0.6% compared with the same period of last year.

Almost 59% of the entire banking system’s foreign assets worth 3.3 quadrillion rials ($88 billion) belong to CBI. The value of CBI’s foreign assets up to April 20 dropped by 2% YOY.

Private banks’ foreign assets, which constitute 25% of the total sum, also declined by 0.1% to reach 1.4 quadrillion rials ($37.3 billion).

However, commercial and specialized banks’ foreign assets, which only account for 15% of the banking system’s foreign assets, marked a respective increase of 0.9% and 6.1% year-on-year.

 Liquidity

Money supply exceeded 12.6 quadrillion rials ($336 billion) by the end of the last Iranian year, up by 23.7% YOY, according to the CBI data.

The volume of monetary base and money in circulation grew by 21.4% and 24% respectively compared with the previous year.