Iran’s Fragile Banking Sector Under Threat From Government Rate Directives

A directive to banks and credit institutions to lower their Rial deposit and lending rates is proving controversial. Intended to stimulate the economy, the move instead looks set to undermine Iran’s largely unregulated banking sector.

The Iranian banking sector is reeling from an April government directive that would force banks to slash both deposit and lending rates. Whilst in theory the spread between their deposit and lending rates is little changed, in practice customers are likely to take advantage of the enforced cheaper lending rates, while depositing their spare cash elsewhere – in shadow banks that are not bound by the new rules and are thus offering higher rates.


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