Al Monitor | Alireza Ramezani: Iranian media reports show that many banks and credit institutions are violating�a decision made last June by the Money and Credit Council, the highest policymaking body of the Central Bank of Iran, in regard�to the interest rate for deposits. The council capped the rate at 15% and threatened banks with disciplinary actions should they ignore the decision. Yet�90% of banks have failed to comply�with the mandate since then, leading economic newspaper Donya-e Eqtesad reported June 8.


An unidentified private bank is offering 23% interest on one-year savings accounts, Tasnim news agency reported June 10. Many other private banks have adopted�similar policies. Even state-run banks offer higher than the authorized interest on savings accounts, the report noted, arguing that the state banks have been left with no other options as they want to survive in the ongoing race to attract liquidity.

Another report pointed to Bank Ghavamin, affiliated with the Law Enforcement Force. According to Akhbar Bank news website, Ghavamin offered up to 18% interest on deposits that were opened in the month of Ramadan (May 27-June 25).

Most of the banks justify their actions by claiming that they are offering a �special� program for a certain occasion. But in fact, they explicitly violate the regulations. Fatollah Amoli, a staff writer with�moderate newspaper Ettelaat, called the looming banking crisis a security threat that could impact the country as severely as possible further Islamic State attacks. The writer criticized banks and the regulator for adopting non-Islamic interest regulations, which could jeopardize the whole banking system.

Some banks and credit institutions are suggesting that their customers keep a certain amount of money in their accounts for a certain period of time to become eligible to receive higher interest. Competition for attracting liquidity has been tough in recent years. Fixed income funds managed by banks or brokerage firms give a return of well above 20%, as an example. According to Alireza Baghani, a financial expert who spoke with Ana news website on May 27, the fixed income funds generate an�annual return of 23%, while participation bonds and Islamic treasury bills offer even higher rates, up to 25%. Car leasing companies also try to attract part of liquidity by offering 28% interest to those car buyers who pay in advance. Thus, banks that generally face serious challenges in their funding and liquidity management have been involved in an �interest war.�
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