Iran banks cut deposit rates after sanctions lifted

Lower deposit rates could encourage the public to start spending and investing large amounts of money which were hoarded during the sanctions era. (AFP)

Iranian commercial banks have agreed to cut their deposit rates in a move welcomed by the central bank, after the lifting of economic sanctions on Tehran brought hopes for a further fall of inflation and faster economic growth.

The banks decided to cut their one-year deposit rate from 20 percent to 18 percent, while the overnight deposit rate will fall below 10 percent, the Fars news agency quoted Kourosh Parvizian, head of the Association of Private Banks, as saying late on Monday.

Deposit rates soared above 20 percent during the sanctions era, when the rial currency was weak and inflation was high, but authorities have started to guide them down towards more normal levels now that the rial has stabilized.

Lower deposit rates could encourage the public to start spending and investing large amounts of money which were hoarded during the sanctions era, thus boosting economic growth, which is currently near zero.

Annual inflation has dropped to 13 percent from more than 40 percent three years ago and last month's lifting of sanctions, after an international agreement on Iran's nuclear program, may further reduce inflationary pressure.

The new deposit rates will take effect on Feb. 20 subject to approval by the government-backed Money and Credit Council. In a statement, the central bank praised the decision and said it would make sure the bodies that it supervised implemented it.

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Last Update: Wednesday, 20 May 2020 KSA 12:04 - GMT 09:04
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