Ways to Lower Bank Rates

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Bank fees and their forex income should be increased to lower the interest rates in the banking sector, the CEO of Export Development Bank of Iran said. “The Central Bank (of Iran) recently issued new directives that can raise banks’ revenue through a rise in bank fees, “Ali Salehabadi was also quoted as saying by IRNA. According to the official, there was a time when some major banks could rely on revenue from fees charged for opening letters of credit but “during the sanctions period, this revenue fell sharply”, he added. Salehabadi’s comments indicate obstacles that prevent banks from lowering their punishingly steep borrowing rates. Some pundits believe the interest rates should get closer to the inflation rate, which is now at 10.2%. While lending rates are officially set at 18% in Iran, real interest rates are higher–a byproduct of historically high inflation rates, a price war between banks to attract more deposits and the quintessential role banks play in funding big projects in the absence of a robust capital market.

 

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