CBI Lends $130m to Bankers Under Repo

EghtesadOnline: The Central Bank of Iran last week granted short-term loans worth 33.1 trillion rials ($130 million) to banks in need of liquidity in the interbank market.

News ID: ۷۵۱۶۰۰

29 November 2020

According to a CBI press statement, the regulator received 15 loan requests worth 61.5 trillion rials but agreed to pay 33.1 trillion rials under the repurchase agreement (repo).

As a component of open market operation, repo is a form of short-term borrowing for dealers in government bonds. In case of a repo, a dealer sells government securities to investors, usually on an overnight basis, and buys it back the following day at a slightly higher price. Repos are typically used to raise short-term capital.

The CBI charged 19.5% for the loans -- a rate seen as a signal that the regulator  is not in favor of higher interest rates in the interbank market.

Earlier in the month, CBI Governor Abdolnasser Hemmati instructed banks not to accept more than 20% in lending rates for interbank transactions. He warned that high interest rates in the interbank market exposes banks’ poor balance sheets.

The average interbank rate reached a peak in the month to Oct. 21, registering an average of 20%. The rate had increased steadily since June.