The Central Bank of Iran (CBI), has instructed all commercial banks and credit institutions to reduce their rial deposit and lending rates in line with falling inflation, in a bid to stimulate the economy. Inflation is down from over 40% in mid-2013 to around 14.5% for the year ending on 20 April 2015.

The CBI’s Money and Credit Council (MCC) with effect from 5 May set a cap of 20% for interest paid on deposits and has lowered the ceiling on the lending rate to 24% from the previous 27-28%, in a bid to boost business lending. These rates are to apply to deposit and loan accounts with a maturity of over one year. But following criticism by some analysts and lawmakers that this could stifle competition in the financial system, the CBI decided to exempt from this new measure short-term fixed deposits of up to one year and sight deposits: banks are allowed to use their discretion in setting rates for such accounts. (CONTINUED - 393 WORDS)