Mohammad Talebi, The chairman of the board and the managing director of Bank Keshavarzi(Agriculture Bank of Iran) announced that high interest rates of facilities will reduce resources for production, while lower rates can alleviate economic stagnation.
Mohammad Talebi, The chairman of the board and the managing director of Bank Keshavarzi (Agriculture Bank of Iran) announced that high interest rates of facilities will reduce resources for production, while lower rates can alleviate economic stagnation.
Regarding the recent agreement of banks on limiting the interest rates and its implementation by Central Bank, Talebi said: "Banks agreed on specific and limited interest rates for deposit accounts and Central Bank gave them the green light while underlining that delinquent banks and institutions will be prosecuted."
Talebi continued: "We're positive that implementation of new interest rates under a logical framework will regulate money market and prevent illegal financial institutions from causing disorder and offering high interest rates."
The managing director of Agriculture Bank of Iran said: "Central Bank's policy is to restrain the activities of unauthorized credit and financial institutions. If they comply with Central Bank's policies and perform according to rules and regulations, we will be able to expect money market to come to balance, but it only depends on how credit and financial institution will fare."
Talebi also said: "Central Bank's new policies will gradually become visible and once the banks implement the new policy, all players in money market will have to comply with the new regulations. It's important to know that offering illegal interest rates will be to the detriment of money market." Talebi went on to say that Central Bank permanently audits the market and that perpetrators will be punished properly.
Talebi called the new policy of Central Bank a driving force in controlling and regulating the money market and said: "According to the new agreement, interest rate of short-term deposits will be 10 percent and for one year long-term deposits will be 22 percent, although a 21 percent-rate was previously on the table."
On whether the new policy for interest rates will be a way out of economic stagnation, Talebi responded: "The new policy is supposed to act as an incentive for people of society as to whether deposit their capital in banks or invest in other areas. As a general principle, interest rate affects stagnation and decrease in the interest rate of deposit accounts has an immediate impact on the interest rate of facilities."
Talebi further stated: "We need to increase motivation for investment and obviously, high interest rates of facilities generates less production while lowering the rates can effectively alleviate stagnation. But it's unfair to expect miracles only by regulating interest rates while many actions are yet to be done."
The chairman of the board of Bank Keshavarzi added: "Incentives for investment should be boosted in order to encourage investors to generate production. Central Bank's supervision over bank interests is to prevent people from investing in false markets such as the promissory note market."
Talebi said: "Non-productive sectors such as promissory note market need to be controlled via implementing taxes, tolls and insurance, but promissory note dealers usually commit tax evasion and there's no concrete method to collect taxes from them."
By stressing that participation bonds with an interest rate of 23 percent has resulted in transfer of money from capital market to the banks, Talebi said: "Some discussions are technical and speculative, but claiming that reduction of money in the capital market doesn't have to with interest rate of participation bonds is not completely acceptable. While a 23-percent interest rate was set for participation bonds, we could see several higher rates in money market at the same time. Therefore relating the interest rate to changes in the capital market is not a valid argument."
Talebi asserted: "We all need to establish real competition in the money market and among the banks. A more competitive market leads to more efficiency and less risks, as a result of which, customers will trust in legal banks and financial and credit institutions."
Talebi declared: "Everyone is responsible for the implementation of Central Bank's policy, since the interest rates that banks have agreed on, will serve as an index for other markets and logical rates can regulate rest of the markets."
The president of Bank of Agriculture concluded: "The more money at the banks' disposal, the more likely it will be to generate real production alongside Central Bank's supervision. It's to the benefit of people to invest in official markets rather than unauthorized and non-productive markets. Needless to say, transferring money to the banks and financial institutions authorized by Central Bank will secure their interests and minimize their risks."