44% Increase in Bank Loans in Spring of This Year

The banking network of Iran has provided 93.4 trillion tomans in loans to various economic sectors this spring, showing an increase of just over 44% compared to the loans disbursed in spring 2015. The Central Bank of Iran announced the details of loans provided by banks to economic sectors, specifying the share of each sector in spring 2016, stating that the service sector accounted for approximately 42.7% of the total loans with 39.9 trillion tomans allocated. Following the service sector, which received the most loans from the banking network, the industry and mining sector received 28.4 trillion tomans, representing a 30.45% share of the total loans disbursed during this period. After these two sectors, the commercial, housing and construction, and agricultural sectors follow. According to the Central Bank's statistical report, about 68% of the total loans, equivalent to 63.3 trillion tomans, were provided as 'working capital'. The 44% increase in bank lending this spring compared to the same period last year is significant because the banking network has lost its ability to direct resources needed by economic sectors in recent years and cannot fulfill its financing duties. The high share of toxic assets in the banking network, the banks' involvement in enterprises, and their prominent presence in the construction and real estate sectors are among the criticisms directed at the banking network. On the other hand, some government critics believe that the government's achievement of a single-digit inflation rate after 25 years is the result of adopting contractionary policies and locking up banking resources, which this data may indicate as a sign of the incorrectness of the government's contractionary policy. Banks also point to overdue debts and the government's, companies', and state institutions' debts to the banking network, as well as the mandatory loans imposed on banks in recent years, as factors contributing to this situation. The government of Hassan Rouhani has initiated policies to increase the financial capacity of banks for several months, including reducing the volume of legal deposits banks hold with the Central Bank, lowering interbank market interest rates, and launching a debt market to pay part of the government's debts to banks.