Bank interest rates should be 3% higher than inflation

As markets enter a period of stagnation and capital market index fluctuations continue to decline, prices fall and transactions fall heavier, whispers of rising bank profits are heard again. The determination of the specific interest rate is bypassed and the interest rate in these funds has reached more than 25 percent.

Therefore, last week, the Central Bank announced that the interest rate on long-term investment deposits has been set at between 10 and 18% per annum, and that banks are required to comply with these rates. During a provincial visit to Qom on January 29, the president made it clear that receiving more interest than what is stipulated in the Monetary and Credit Council is not allowed, and that any bank that receives more interest must return it to the people.

But in the meantime, the banks believe that although the banking network complies with all the listed numbers of interest rate approvals, this interest rate is not reasonable in the country’s inflationary conditions and should move in proportion to the inflation rate.

“Mohammad Reza Jamshidi,” Secretary of the Association of Private Banks and Credit Institutions, in an interview with ILNA Economic Reporter, said that all banks operate under the supervision of the Central Bank and according to Article 20, paragraph 4 of the Law on Interest-Free Banking, the interest rate is determined by the Monetary and Credit Council. “All banks are required to comply with these approved rates and are subject to these approvals,” he said. The Monetary and Credit Council notifies both the interest rates on deposits to deposits and the setting facilities to banks, and the fixed interest rate naturally applies after each transaction.

He continued: “Currently, in the deposit section, the interest rate on account set by the Central Bank is a maximum for two years and 16% for one year.” If at the end of the financial period the banks’ interest rate was higher than these numbers, the excess interest should be divided among the depositors in this bank based on the term of the deposit, but if the interest rate is lower, nothing will be withdrawn from the deposit because this interest is guaranteed and deficit Banks must reimburse the profits themselves.

Jamshidi added: the same process is implemented in facilities and the interest rate of facilities in final transactions is a maximum of 18%, and if the transactions are participatory and Mudaraba, the rate is determined after the transaction and is divided between the parties to the transaction.

The Secretary of the Association of Banks and Private Credit Institutions said about the operation of various funds and attracting deposits to these funds: “Investment funds are not subject to the approvals of the Monetary and Credit Council and naturally, after making transactions, they make any profit for each period between buyers Divide shares or units of the fund. It should be noted that the parties to the transaction are the buyer and the seller and not the depositor and the recipient of the facility, so they will not include the approved profits.

He stressed: “Certainly, the migration of money from the bank to the funds has been very significant and significant, but accurate statistics of this amount are not available, and of course the Central Bank has instructed the banks to sell their shares if they are shareholders of these funds.” And pull aside.

Jamshidi, stating that the reality is that interest rates in the facilities sector are very attractive with this inflationary situation in the country, said: “Today, people are looking to take loans from banks and pay interest by depositing in other sectors.”

The secretary of the Association of Private Banks and Credit Institutions, emphasizing that we have not proposed an increase in bank interest rates, said: “Although we have not proposed an increase in bank interest rates, the 18% rate in this inflationary situation is not only unreasonable but also harmful.” Banks pay 18% interest on deposits and have to facilitate 80% of these deposits at the rate of 18%, so by calculating bank charges, a simple calculation of banks’ income is obtained from this place. Banks are not charities and should be concerned about the costs, economy and efficiency of their collection.

He continued: “The reasonable interest rate should be 3% higher than the inflation rate, which is very high due to the inflation of the Iranian economy, but the interest rate should be economical and attractive for the depositor.” In the current system, both the depositor and the borrower suffer because the economy is sick.

Jamshidi added: “In a situation where people deposit to receive interest, in the next year, they face a reduction of several tens of percent of their money due to currency devaluation. On the other hand, producers in this market and economy can afford to pay 18 percent interest on facilities Do not have.

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