...

Low interest rates harm Iranian banks?

Business Materials 26 October 2016 18:28 (UTC +04:00)

Baku, Azerbaijan, Oct. 26

By Farhad Daneshvar – Trend:

While some media reports suggest that the amount of money held in deposit accounts at Iranian banks has dropped over the past months, recent statistics released by Central Bank says the opposite.

Over the past year, at least two times Iranian banks have announced downward revisions on deposit interest rates.

The first downward revision came in early 2016 when the banks decreased the interest rates on deposits to 18 percent from 20 percent.

Later in June, banks again announced that they are going to cut down interest rates to 15 percent, following the government’s breakthrough in tackling inflation as its rate dropped to single digits (9.5 percent) for the first time in a quarter century.

The decision on decreasing interest rates carried further implications as rumors about financial losses at 14 Iranian banks got around, blamed on lower interest rates.

However, IRNA news agency says that recent statistics released by Central Bank of Iran appear to put an end to the speculations over the negative implications.

According to the report, the volume of money held in term deposit accounts at the country’s banks in the fifth Iranian calendar month (22 July-August) has increased by 29.4 percent year-on-year.

The Deposit Growth Rate (the quantity of deposits held in banks), albeit, has decreased by four percent in a period of seven months (February-August) year on year, dropping to 8.3 percent.

Some observers have earlier suggested that reducing interest rates was carried out with an aim to give a boost to the country’s depressed economy by lowering inflation rate.

In the meantime analyst have suggested that the decision on lowering interest rates would have a positive impact on Iran’s capital market, in particular Tehran Stock Exchange.

According to official announcements, while banks attract 90 percent of investment at Iran’s financial market, two percent goes to capital market and the insurance market lures in eight percent.

Tags:
Latest

Latest