CBI data shows the money owed by banks to the regulator during the calendar month ending August 22 totaled 1.48 quadrillion rials ($10.48 billion), registering an increase of 34.8% compared to last year’s corresponding month and up 12.7% compared to the last month of the past fiscal that ended in March, IBENA reported.
Of the aforementioned amount, 4.28 trillion ($30.03 million) belonged to commercial (public sector) banks, up 64% year on year. Specialized state-owned banks’ debts amounted to 45.96 trillion rials ($322.52 million) during the month indicating a 3.7% rise YOY.
Statistics suggest the main reason behind the increase in debt lies in overdrafts by private-owned banks, non-government banks, and credit institutions. The volume of these banks and institutions’ debts was 98.6 trillion rials ($691.92 million) during the period under review, posting a staggering 94.3% increase YOY, Financial Tribune reported.
This is while analysis of past months shows that public-sector commercial as well as specialized banks’ debts to the CBI decreased. Thus, it can be inferred that the main reason for the alarming increase in debts is in the rapid growth in the debts of private banks and lending institutions.
Managing overdrafts is one of the most important duties of the banking system to bring discipline to lenders' practices and curb the financial system’s instability. In this regard, CBI governor Abdolnaser Hemmati recently issued a directive to banks obliging them to settle existing overdrafts with the CBI. Accordingly, loans and/or access to CBI resources by banks and credit institutions that have overdrafts with the CBI are banned until they clear their debts.
In his directive Hemmati emphasized that controlling the monetary base by reducing the debts of banks and credit institutions is high on the CBI agenda.