Banks Are Obliged to Give $4.9b in Mandatory Loans

EghtesadOnline: Banks and credit institutions are mandated to allocate up to 2,000 trillion rials ($4.92 billion) in interest-free lending for government programs including loans to newlyweds, for childbirth and to support needy families.

News ID: ۷۵۲۱۹۴

18 January 2023

Banks and credit institutions are mandated to allocate up to 2,000 trillion rials ($4.92 billion) in interest-free lending for government programs including loans to newlyweds, for childbirth and to support needy families.

This is included in the budget bill for fiscal March 2023-24 submitted by President Ebrahim Raisi to the parliament last week.

Banks are obliged to lend in the form of as Qarz-ol-Hassanah schemes (interest-free microcredit) amid valid concerns about the detrimental impact of mandatory lending on the already troubled banking industry.

Economists and senior bankers have always censured policy and decision making bodies for imposing the extra burden and massive obligations on banks to keep lending beyond their ability and capacity.

The subsidized loan schemes demanded from banks has undermined their already overstretched financial  resources.