Agreement on a 2% Reduction in Bank Interest Rates in Iran

The state news agency IRNA reported, citing an anonymous "banking official," that the CEOs of Iran's state and private banks agreed on Saturday, November 7, to reduce the interest rate on one-year bank deposits from 20% to 18%. According to this news agency, there was no discussion in this meeting regarding the rates of other deposits (under one year), and "in principle, banks are allowed to act according to their discretion regarding the rates of other deposits." Based on this report, it was agreed in this meeting to reduce the interest rate on loans exchanged within the banking network to a maximum of 24%. These agreements are subject to approval by the Money and Credit Council and notification by the Central Bank to the banks. The Central Bank of Iran had issued a directive in May to reduce the interest rate on term deposits from 22% to 20% per annum. In recent weeks, coinciding with the government's introduction of an "anti-recession package," Valiollah Seif, the Governor of the Central Bank, announced a reduction in bank interest rates. Iranian President Hassan Rouhani emphasized on Wednesday, April 15, that bank interest rates in Iran must be reduced. A week prior, Mohammad Baqer Nobakht, the Vice President of Iran, had announced a reduction in bank interest rates in line with the inflation rate. Iran is one of the few countries in the world that offers more than 20% annual interest on term deposits. In most advanced and industrialized countries, the interest rate on bank deposits ranges from 1% to 3%. For a long period during Mahmoud Ahmadinejad's presidency, the bank interest rate was set below the inflation rate, a situation referred to by experts as "financial repression." However, experts state that with the reduction of inflation from over 40% to about 15%, the conditions for reducing bank interest rates have been created.