Not Interested in Long - term Deposits
Kamel Taghavi Nejad, The chairman of the board and the managing director of Bank Sepah spoke of the declining interest of customers in opening long - term and above one year long - term deposit accounts and said: “Besides depositors, banks will also increase their financial risks by undertaking responsibilities for long - term deposits when inflation rates are decreasing”.
Kamel Taghavi Nejad, The chairman of the board and the managing director of Bank Sepah spoke of the declining interest of customers in opening long-term and above one year long-term deposit accounts and said: "Besides depositors, banks will also increase their financial risks by undertaking responsibilities for long-term deposits when inflation rates are decreasing".
Regarding the agreement of banks on removal of one year long-term deposits, Taghavi Nejad said: "Due to risks and fluctuations of market, customers understandably opt for short-term and a maximum of one year long-term accounts".
Taghavi Nejad added: "History of deposit accounts in recent years clearly indicates customers' declining willingness in opening long-term deposit accounts. Furthermore, considering the decreasing rate of inflation in the past few months and the months to come, banks need not to add up to their risks by undertaking long-term commitments when inflation rates are subsiding," he went on to say: "Banks' anticipation of offering a 22-percent interest rate doesn't comply with economic estimations and future plans of the government."
Concerning the question whether the banks will have difficulties offering long-term facilities in case of one year long-term deposits, Taghavi Nejad replied: "Our experience shows that customers tend to extend deposits for next terms and it helps banks to clear their debts to customers."
The chairman of the board of Bank Sepah continued: "Under the current condition of liquidity, banks prefer to pay their facilities in the form of working capitals of firms and these facilities are of a short-term nature. Resources of National Development Fund of Iran will be used to compensate for non-payment of long-term facilities and banks will be capable of funding infrastructure projects by utilizing these resources."
Taghavi Nejad further stated: "Bank Sepah managed to step up and invest in big projects by taking advantage of National Development Fund resources. We also expect to see a decline in interest rates of facilities once the agreements are effective."
He also said: "Considering the competition of banks to attract resources, the full cost of money had soared dramatically and interest rates of facilities also increased, but we are confident that the new agreement will tone down the full cost of money and the interest rates of facilities will gradually decline."
Taghavi Nejad asserted: "We have informed all branches that banks' agreement on interest rates will go into effect as of next Saturday."
* Implementation of Interest Rates under Scrutiny by Central Bank
The managing director of Bank Sepah insisted that banks must fulfill their commitments to the new agreement and said: "Some institutions will come up with ways to bypass the regulations and the agreement will ultimately fail, unless the new regulations go under strict supervision." Taghavi Nejad emphasized: "Central Bank needs to tighten the control measures on financial institutions and shut down illegal institutions."
Taghavi Nejad stressed that legal banks and financial institutions also play a role in this regard and explained: "Banks can block the accounts of illegal institutions and hereby prevent their activities. Such measures can effectively curb the role of unauthorized institutions in money market and minimize their impact on the performance of authorized banks and institutions."
* Central Bank and Money and Credit Council are in
Regarding a potential agreement on the interest rates of facilities, the chairman of the board of Bank Sepah declared: "We need to clearly define the range of interest rates for exchange and cooperative contracts and I believe that Money and Credit Council alongside Central Bank are responsible to deal with this issue."