Economy Ministry unveils new policy package to reform banking system

April 30, 2022 - 15:31

TEHRAN - Iranian Finance and Economic Affairs Minister Ehsan Khandouzi unveiled a new policy package for managing the country’s banking sector on Saturday, IRNA reported.

Following the motto of the new year which is “knowledge-based and job-creating production”, the mentioned package includes policies and strategies that are mainly focused on directing the country’s banks toward productive sectors including knowledge-based production.

Reforming the banking system, promoting financial discipline, diversification of financing methods, improving the quality of credit institutions' interactions with the people, facilitating the access of production units to banking resources, and strengthening self-regulatory and supervisory structures in the banking network is also among the major goals of the said package.

All the country’s government-owned banks have been notified by the ministry about the new policies and strategies for the banking sector.

Based on the mentioned package, banks are prohibited from investing in financial markets like foreign currencies, gold, coins, and real estate.

This means that the country’s banking system shall refrain from any activities including the purchase of land, and construction of commercial, office, residential, or shopping complexes in ways other than acquisitions with the aim of liquidating the facilities granted to the owners.

The package also emphasizes that in order to make optimal use of allocated resources and to manage resources and expenditures and direct bank facilities towards profitable and value-added activities, credit institutions are obliged to implement appropriate procedures in such a way that at the end of each year, the ratio of the balance of the granted facilities to the balance of the deposits (after deducting legal deposits) should be at least 80 percent.

Unfortunately, banking regulations in Iran have not been amended since [Iranian calendar year] 1362 (March 1983-1984), therefore experts and those active in the economic sectors believe that there are currently some ambiguities in the banking system, so its reform and amendment is very vital and important.

Back in 2019, former Iranian Finance and Economic Affairs Minister Farhad Dejpasand had announced that a plan for reforming the country’s banking system was prepared by the ministry, however, the plan was not implemented properly.

EF/MA

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