Industrial Bank Arrears Down to 11%

EghtesadOnline: Iran's industrial sector has managed to repay 4.5% of its debts to the banking system over the past four years, said the minister of industries, mining and trade.

News ID: ۷۴۱۳۸۸

08 May 2017

"The 15.5% arrears of the sector belong to the previous government, but our industries managed to bring it down by 4.5% to reach 11% in recent years, which shows their intention to settle their debts," Mohammad Reza Nematzadeh was also quoted as saying by Ebinews.com.

The minister noted that if banks suffer from capital shortage, they cannot offer appropriate services, therefore the goal is to shore up the banking system through recapitalization.

"Banks are facing issues that are not easy to address, since they are related to macroeconomics," he said, adding that targeted lending schemes enforced by the parliament has created problems for banks.

According to Financial Tribune, there has been much argument about bank’s large contribution in Iran’s financial market. Lenders reportedly account for 90% of financing in Iran. However, the huge amount of bad loans has disrupted financing in the key sector.

The Iranian banking sector’s ratio of non-performing loans stood at 11% by September 20, down from 13.6% in September 20, 2014.

It was also announced by central bank officials that Iranian lenders do not have access to 45% of their total assets.

However, Nematzadeh noted that production cannot be boosted without banks' help, adding that "they even agreed to pay loans to indebted production units and waive their penalties after the delay in loan repayment was justified by the imposition of sanctions".

Last year, the government devised a plan to support 10,000 struggling and incomplete production units last year, which scheme will be continued this year with better methods.

The government allocated 160 trillion rials ($4.2 billion) last year to support struggling small- and medium-sized enterprises to stimulate the industrial sector. It plans to allocate the same amount in the current Iranian year.

In line with helping the production sector, Bank of Industry and Mind has allocated loans worth 22.5 trillion rials ($600 million) to boost small- and medium-sized enterprises across the country.

Isfahan, Tehran and Qom provinces have received the most amount of loans from BIM to improve their production sectors.

Despite the fact that BIM only pockets 1.2% of the total banking deposits, the bank accounted for 11% of the loans allocated to SMEs.

BIM is one of the five state-owned specialized banks in Iran.