Central Bank of Iran (CBI) recently published economic statistics of September 2018 in different sectors including money and banking, payment balance, financial and budget and capital market. In this article, we discuss the money and banking part that addresses CBI and banks’ balance sheets. Liquidity in first half of this year increased 9.3 percent and that was mainly from money, based on this report. Money growth rate is 25 percent although near money growth rate is just 7 percent. In other words, demand for money has gone up during these 6 months. CBI assets increased 120 billion Rials in September 2018. CBI asset changes comes from changes in foreign assets and banks debts. Based on this reports, 20 billion Rials was because of banks’ overdrawn.
According to this report, banks debt to CBI which was out of its long-term trend on May and July 2018 returned again on its previous long-term trend. Daily overdrawn of banks came back to 800 thousand million Rials level from 1640 and 2920 thousand million Rials in May and July respectively. Bank’s overdrawn in recent months played an important role in liquidity motivation.
Banks usually finances through depositors, inter-bank market and overdrawn from CBI. They use the latter case when they couldn’t finance from other options. So, three different scenarios can be possible to explain this issue:
First, depositors in two mentioned months, probably tend to withdraw their deposits and this issue led to increase in bank’s credit crunch and they had to use CBI resources. Due to government’s action in April to apply several restrictions on foreign currency market, this scenario is possible that banks’ credit crunch has increased.
Second scenario is that bank’s credit crunch doesn’t change significantly during these months and this increase in overdrawn level is because, policy makers didn’t react or resist to bank’ overdrawn. Due to the fact that banks are not systematically restricted by overdrawn, this scenario is also likely. The third scenario is that banks over the two mentioned months have been financing individuals who were interested to withdraw their funds from the banks as a result of the asset markets’ attractiveness. Given that the growth of long-term deposits and facilities has increased in these months, a combination of all three scenarios seems to explain the growth of bank overdrawn from the Central Bank of Iran.