Forex Deposit Rules Updated

EghtesadOnline: The latest update of regulations concerning foreign currency deposits in banks has been released by the Central Bank of Iran, according to which banks are required to return the original amount of the deposit plus its interest in hard currency to the customer upon demand.

News ID: ۷۸۲۱۶۲

18 March 2018

The bank emphasizes that if the customer had made his or her deposit in a foreign currency, the bank is obliged to pay the deposit and/or its interest in the same currency.

The announcement would remove fears by some customers that if they deposited in a hard currency in a bank or financial institutions, at the time of withdrawal, the bank would offer them the equivalent in rial.

As the Iranian currency is prone to fluctuations, investors are wary of parking their foreign currency in banks, fearing they would lose their money. Another reason hard currency deposits in banks was the country's multiple exchange rate system whereby banks choose to convert hard currencies at lower rates, Financial Tribune reported.

In its statement, CBI assured that the measure would provide "peace of mind" to foreign currency depositors, promote trust in banks and help avoid the risk of keeping cash at home while benefiting from "proper " and "desirable" returns on their deposits.

The announcement is the latest move to encourage investors to keep their money in banks after the rial experienced a sharp slide against the US dollar in 2018.

At the height of forex market volatility in mid-February and just before the unveiling of CBI's rescue package, the rial was being traded at 49,000 to the greenback, having plunged 14% since the start of 2018.

The central bank's package saw a reverse from the regulator's loose monetary policy adopted in September, which forced banks to reduce their deposit and lending rates.

Banks were authorized for two weeks to offer interest rates of up to 20% on fixed one-year deposits, against 15% previously. The bank had earlier argued that as inflation had dropped to single digits after a quarter century, so should interest rates.

Forex volatility had caused widespread concerns among the public and investors that the government is no longer capable of calming the market through central bank forex reserves and had revived fears of price rises and economic disillusionment.

CBI's forex package also includes the issuance of rial-based foreign currency bonds and the sale of gold coins at attractive prices.