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Lower rates but higher fees move ‘might push down Bank Melli Iran loan interest level to 14% or even further’
to impose highest-level sanctions on Iran, with sanctions to be extended to foreign traders and investors who remain in business with the Islamic Republic.
Geneva-headquartered BCP, founded in 1963, has been among the players active in Iran-related trade finance in commodities, finance sources told Reuters. “We have suspended any new transaction related to Iran after May 8, 2018 and started the ‘wind down period’ within the framework of the OFAC [Office of Foreign Assets Control of the US Treasury] announcement,” BCP said in an emailed statement to the news agency.
The Federation of Indian Exporters Organisation (FIEO) told Reuters that the IndusInd and UCO banks, which facilitate trade with Iran, have informed Indian exporters they should wind up their deals with the Islamic Republic by August 6. Earlier in May, Germany’s second largest lender DZ Bank said it would halt financial transactions with Iran in July.
If there is an exodus by the very limited number of foreign banks that were willing to process transactions with Iran even before the Trump nuclear deal exit and sanctions announcement, it will come as a big blow to the country, particularly where trade finance is concerned.
Bank Melli Iran (BMI), Iran’s biggest bank, could lower the interest rates it offers to commercial and industrial companies while making up for the lost revenue by instead bringing in higher fees, the Financial Tribune reported on May 13 citing Banker Magazine . The change might help to boost Iranian commercial and industrial output, BMI reportedly believes.
BMI officially offers loans to the sectors at 18%, but the CEO of the state-owned lender, Mohammad Reza Hosseinzadeh, said a change in loan structure could achieve the more competitive rates. “Bank Melli Iran [in certain instances] has started charging better [adjusted] fees for banking services to reduce its loan interest rates,” he said. He added that if the plans in this area went well, the bank could offer interest rates of 14% or even below 10% for the first time in several years. “When banks give 20% interest on deposits, even receiving 18% interest on loans is not profitable,” he pointed out.
Hosseinzadeh also talked of banking certificated with official foreign currency backing to bolster the local loan market, something which was introduced in haste a few months back to stop the run on the rial. That move proved successful according to Iranian banking officials, but only as a short-term measure.
8.2 Central Bank policy
Iran updates foreign currency rules for travellers
The Central Bank of Iran (CBI) has announced a new set of updated rules for travellers entering and exiting the country, it said in a press release issued on May 13. Tehran has sought to clarify the new rules as part of an overhaul of foreign currency transactions since the run on the Iranian rial (IRR) in April that have taken the currency to a series of all-time unofficial lows.
The new rules stipulate that those leaving the country by air can carry a total of €5,000 or equivalent in other currencies, while those entering can also bring up to €5,000, down 50% on the previously stated limit, without declaring the sum to customs.
29 IRAN Country Report June 2018 www.intellinews.com