Bank Loans in Iran Rise 30%

EghtesadOnline: Banks paid 2,188 trillion rials ($19.3 billion) in loans during the first four months of present calendar year to July 22.

News ID: ۷۴۸۴۶۹

17 September 2019

Compared to the corresponding period last year, the figure was up 30.9% or 517 trillion rials, according to a report published on the Central Bank of Iran website.

Loans to help raise working capital of manufacturing and trading companies amounted to 1,308 trillion rials ($11.5 billion) which accounts for close to 60% of all loans paid during the period.

Working capital loans increased by 283 trillion rials compared to the same period last year, indicating annual growth of 27.7%, according to Financial Tribune.

Of the total loans paid for this purpose, mining and industrial firms got 486 trillion rials, grabbing the lion’s share of 37.2% of the loans to fund working capital.

Lenders, including state and private banks plus credit institutions, paid 602 trillion rials ($5.3 billion) to businesses in mines and industries sector, 80% of which flowed to help fund working capital.

The central bank ascribed the bigger share of loans for working capital largely to the regulator’s concerns about the viability and survivability of manufacturing units struggling in the challenging economic conditions, coupled with the tanking of the rial, higher raw material costs and the pressures imposed by the new US sanctions.

However, the CBI warned that despite the rising volume of loans, due measures should be taken to avoid its inflationary impact born out of rising demand for goods and the ballooning liquidity that has long been a major concern of businesses and economic experts.

CBI governor, Abdolnasser Hemmati announced earlier that with appropriate measures it was working to ensure that aggregate demand would not jump in the present economic conditions.

Aggregate demand refers to total demand for final goods and services which if raised leads to demand-pull inflation.

Major Recipients

Apart from funding working capital, banks gave loans for other purposes, including creating and developing businesses, repairs, renovation and buying homes.

Accordingly, banks granted loans worth 208.5 trillion rials for “creating” new businesses, 160 trillion rials for “development [business units]”, 63.4 trillion rials for “repair and renovation”, 220.3  trillion rials for “purchasing goods”, 49.7 trillion rials home loans and loans for “other purposes ” amounted to 177.7 trillion rials during the four months period.

In terms of diverse economic sectors, the services sector outperformed others with 887 trillion rials ($7.8 billion) in loans.

The next major recipient was industrial and mining followed by the commercial sector with 602 trillion rials and 389.3 trillion rials in loans respectively.

Agriculture and housing had the smallest share. Loans to farmers reached 179 trillion rials while lending the housing sector was 126.3 trillion rials.