Last recent months witnessed a harsh rivalry among banks and financial and credit institutions to absorb more deposits while mesmerizing people by promising high interest rates for bank deposits.
Last recent months witnessed a harsh rivalry among banks and financial and credit institutions to absorb more deposits while mesmerizing people by promising high interest rates for bank deposits. Private banks and unlicensed institutions were the first to spark the flame and later, public banks followed suit. It all happened at the time when hikes in the stock market indexes proved bubbly and as sheer outcome of the optimism created by the perspective of further agreements between Iran and the rest of the world. In an attempt to appraise the market and in order to prevent the flow of liquidity towards parallel markets, the Central Bank issued bond with 23% annual yield. The CB managed to sell 75% of the bonds via three correspondent banks. It arrived at a certain conclusion; Interest rates for deposits had nothing to do with the fall of stock exchange index. However, it is necessary to curb the wild competition between banks to raise interest rates. As the outlook for future decline of inflation rate looks
brighter, it seems crucial for the banks to consider future forecasts as their benchmark for interest rates and ignore past trends.
The Central Bank strongly recommended the commercial banks to pay close attention to macroeconomic transformations of the country including the declining trend of inflation rate and point-to-point inflation while deciding about interest rates for deposits. The good aspect of the recent events was the fact that the CB let the banks determine their rates based on a consensus among themselves and then announced the new rates to make it official.
Meanwhile, the significance of economic growth was highlighted once again. Due to widespread recession in economy, the latest rise of stock exchange index seemed irrational and baseless. Its decline was eminent and inevitable since the economy was still far from desirable growth