News & Reports News Year 2011 May , 2011 Iran cuts interest rates on savings, loans

Iran cuts interest rates on savings, loans


Iran's central bank has cut the interest rates that banks can pay on savings and charge for loans, in a move aimed at spurring growth. Central bank Governor Mahmoud Bahmani told banks to ""slash their lending rates to 14 to 17 percent from 26 to 28 percent,"" IRNA news agency reported on Tuesday.

""The aim of the decrease in interest rates is to help output and industry in order to decrease the final prices of products and to control and manage imports,"" Bahmani said.
The central bank, whose edict covers public and private sector banks, also decreased the interest rate for long-term savings to 15 percent from 17 percent. Iran's central bank sets interest rates that banks can impose on loans and savings.

The Association of Private Banks has written to Bahmani to call for the new measure to be reviewed. ""We are not comparable to governmental banks, we should determine these rates ourselves,"" the head of one private bank told Reuters on condition of anonymity. Bahmani defended the central bank's move.

""There were lots of economic experts and activists who insisted on decreasing the interest rates and now that the plan has been submitted they criticize it,"" he said. Bankers fear that lending at the newly lowered rate would effectively be a loss-making proposition as the return could be lower than real inflation. Iran's official inflation rate was 12.4 percent during the last Iranian year which ended on March 20, still much lower than around 30 percent in 2008