The head of the Association of Private Banks and Credit Institutions, Kourosh Parvizian, has sent a letter to Central Bank of Iran governor, Valiollah Seif, informing him about private lenders’ decision to lower their one-year deposit rates from 18% to 15%.
The letter, published by Tasnim News Agency on Saturday, notifies Seif that the banks will implement the rate cuts from June 21. The move comes after the Money and Credit Council– the top monetary decision-making body – failed to discuss the issue of interest rates at its last meeting on Tuesday, giving banks space to set rates as they see fit.
“CEOs of private banks and credit institutions, in a meeting on June 12, agreed to offer a maximum 15% interest on one-year deposits which will provide the basis for also setting rates on short-term deposits,” Parvizian said.
The letter, however, does not mention any plans for lowering the lending rates which have hovered around 20%, raising concerns that the gap would hurt the business landscape and small investors.
Earlier this week Bank Pasargad Iran became the first lender to announce that it has lowered its one-year deposit rates to 16%. Hossein Motamedi, ENbank’s CEO, also announced that his bank will offer lower deposit rates and several other banks said they would follow suit.
Businesses Concerned
Failure to address lending rates has raised concern among businesses. Cheap loans seem to be vital for boosting production and trade in the country. Currently, bank Loans hover between 20-22%.
Economy Minister Ali Tayyebnia has stressed that there needs to be a logical 2-3% or a maximum of 3-4% margin between deposit rates and lending rates.
Meanwhile, the CBI said on Friday that the Money and Credit Council will have to review the ‘economic trends’ report before making the final decision about lowering deposit and lending rates. The report is set to be handed to the council in a month, according to CBI vice-governor, Akbar Komeijani.
Addressing banks’ plan for lowering deposit rates from next week he said, “Banks can make their own decisions. [But] I hope they will also make the final decision to cut lending rates as well before the MMC intervenes,” Fars News Agency quoted him as saying.
“Interest rates are a key issue for the CBI and it has always been monitoring it,” the senior banker added.
