Iran Cuts Interest Rates Again, But Banks May Struggle To Comply

The Central Bank or Iran (CBI) has announced a second cut in interest rates since April 2015 as the country looks to further stimulate its economy following the lifting of nuclear sanctions last month.

The cut, which came into effect on 20 February, was approved by the CBI’s Money and Credit Council (MCC), following prior agreement among commercial banks to reduce deposit and lending rates. President Hassan Rohani says high interest and deposit rates are harming the economy, as they deter businesses from borrowing.

The MCC has cut the one-year deposit rate to 18% from 20%, with the overnight deposit rate falling below 10%. It has also lowered the lending rate that banks can charge customers, with regular loans carrying interest at 20%. Shariah-compliant Musharakah loans have an indicative rate of 22%, but banks have some flexibility to charge a higher rate. In April the MCC lowered the ceiling on lending rates to 22-24% from a previous 27-28% (MEES, 8 May 2015). (CONTINUED - 1113 WORDS)