4,200 State Accounts Moved to Central Bank of Iran

EghtesadOnline: Some 4,200 state-owned companies’ bank accounts have been transferred to the Central Bank of Iran since March 6, 2017, when President Hassan Rouhani issued the landmark directive aimed at enhancing the transparency of government finances and public entities’ expenditures.

News ID: ۷۴۳۹۰۸

25 September 2017

“By the end of the previous Iranian year to March 20, 2017, about 2,400 government [companies’] bank accounts had been moved to CBI while the figure reached 4,200 in the past six months,” Masoud Rahimi, the director of CBI’s Office for Banknote Issuance, was quoted as saying by IRNA.

According to Rahimi, the Fifth Five-Year Development Plan (2011-16) had mandated the government to move all of its bank accounts to CBI.

He added that moving this number of accounts during this period indicates that the account-moving process has been more successful than in the past five years, Financial Tribune reported.

The government’s decision to move its accounts from agent banks to CBI was announced on August 2016, in line with its policies to promote transparency and avoid dodgy practices related to expenditure.

The diffusion of government accounts made it pretty difficult to supervise them properly and therefore a number of banks labeled them as private resources and used them for loan allocation. This led to an unhealthy relationship between account holders and the banks.

CBI, as the government’s bank, is legally entitled to provide banking services to all public-sector organizations. As per the law, all state bodies should deposit their money at CBI.

However, due to the lack of proper infrastructure, CBI had been forced to move the government’s accounts to a number of agent banks, both public and private.

Rahimi noted that there are other factors that affect this process and since not all of them are within the ambit of CBI, it is hard to predict when all state bank accounts will be transferred to the central bank.

Hurdles on the Way

According to the CBI official, the lack of an effective communication platform and a proper network between CBI and state-owned companies and organizations is the biggest problem facing the directive’s implementation.

“Providing a safe communication platform is a hard task that currently rests with the Ministry of Communications and Information Technology,” he added.

Rahimi noted that the ministry was supposed to establish the liaison platform but its absence has posed the biggest obstacle to moving government accounts to CBI, adding that monetary experts can suggest a better solution to resolve this issue.

The director of CBI’s Office for Banknote Issuance explained that lack of transparency is one of the biggest factors keeping government accounts in other banks.

“According to some resources, about 220,000 accounts have been registered by state-owned companies but currently due to CBI actions, the Ministry of Economic Affairs and Finance and the National Treasury, the number has been reduced to 70,000, all of which should be transferred to CBI,” he added.

Rahimi emphasized that through CBI’s new mechanism that uses payment identification, there is no need for multiple accounts held by one organization and according to estimates, the number of government accounts will shrink dramatically after they have all been transferred to CBI.

Aside from moving all state-run companies’ accounts to CBI, the bank has also begun to disburse the salaries of civil servants directly since two years ago.

All of this is a preamble to materializing President Rouhani’s vision of paying the employees of all three branches of government through CBI, which will ease the process, increase supervision and prevent any irregularities.