Iran banks get freedom to set deposit rates

Points of Essence:

• Iranian banks will be at liberty to set their deposit rates above the levels set by the central bank as the government was said to soften its stance on monetary policy.
  
• As the banking system adheres strictly to the interest ban by the Islamic rules, Iran uses the officially termed “provisional” interest rates, as rates to be paid to depositors or received from borrowers, reflect profits and losses of a business.

TEHRAN: Iranian banks will be allowed to to raise their deposit rates above levels set by the central bank, according to media reports on Monday that were seen as a sign the government was softening its stance on monetary policy.

The central bank and President Mahmoud Ahmadinejad’s government have been at loggerheads over interest rates, with the government seeking to keep them below inflation of 27% and the bank arguing higher rates are needed to curb price rises.

Iran Government Introduces New Banking Policies

Points of Essence:

• Iranians banks will be subjected to a new profit rate policy which decided the followings:

1. profit rate on financial facilities on exchanged agreements will be 12 per cent:
2. the profit on banking facilities for the priority projects of small, fast-response and agriculture firms will be 10 per cent – inclusive of government subsidy.
   
3. However, the latter will be conditional to the success of the projects’ objectives, otherwise the profit on them will be 12 per cent.

A policy-supervision package has been presented to the banks to be implemented from tomorrow after being signed by the president [Mahmud Ahmadinezhad].

The chancellor of the Central Bank of Iran, [Tahmasb] Mazaheri, said that following exchanges of views over decreasing banking interests, it was finally agreed to keep the interest rates unchanged until the discussion about inflation is finalized this year.

Mazaheri added that according to the new instruction, the profit [interest] on financial facilities on exchanged agreements [Oqud-e Mobadele’i] will be 12 per cent and the profit on banking facilities for the priority projects of small, fast-response and agriculture firms will be 10 per cent – inclusive of government subsidy. However, the latter will be conditional to the success of the projects’ objectives, otherwise the profit on them will be 12 per cent.

Originally published by Vision of the Islamic Republic of Iran Network 1, Tehran, in Persian 1630 25 Jul 08.

(c) 2008 BBC Monitoring Middle East. Provided by ProQuest Information and Learning. All rights Reserved.

Story Source: BBC Monitoring Middle East