TEHRAN, Iran, Dec.3
Trend:
An increase of bank interests and advances rate in the current situation would cause people to move the capital to other markets, said the banking advisor of the Iran Chamber of Commerce.
"Considering the fall of Iran's stock market index, there should naturally be a plan for bank interest rate since monetary and capital markets have hidden connection," Mohammad Mehdi Raesizadeh told Trend in an interview.
"Decision over bank interest rate is rooted in the inflation rate. If the inflation rate continues to increase or the announced figures of inflation rate are not correct, and if the deposit interest rate policy is not revised it would cause people and deposit account owners who have a smaller amount of savings to think about removing their sources to other markets," he pointed out.
Raesizadeh went on to say that the government incentives and low banking interest rate have caused people to move toward the stock market to increase their capital, but the drop of the stock index made shareholders frustrated with the stock market and looking to substitute other markets
"Although there has been a gradual delay in stock and in recent days the trend is sliding to positive but there is a long way to reaching the 2 million units index that mostly was a bubble and wasted sources," he said.
According to him, the government's main work is to control the inflation rate. Increasing interest rate and following that by an increase of bank advances interest rate. Furthermore, increasing the advanced interest rate is harmful to the production sector and would prevent production leaps.
"If inflation continues to be 40 percent we should not expect that country's banking system could preserve sources with a 15 percent interest rate. Resource efficiency options are either via banking system or stock or capital or housing and real estate or foreign currency and gold markets all were subordinate from inflation," he noted.
Raesizadeh pointed out that in the current situation, if measures for increasing deposits interest rate would not lead to the sudden rise of advances interest rate it could be effective in preserving sources.
"Naturally if inflation is curbed the reverse would happen that means an increase of motivation for entrepreneurship and sources would lean toward production, therefore, the deposit interest rate should be reduced," he added.
"Advances interest rate should be equal with inflation and interest rate. In the current situation if we want to increase the interest rate and advances interest rate should rise equally then the conditions for each production unit would not be profitable, the commercial sector could not pay 25 percent advance interest rate," Raesizadeh said.