Azerbaijan increases interest rate on insured deposits
By Nigar Abbasova
The Azerbaijan Deposit Insurance Fund (ADIF) has increased the maximum interest rate on deposits covered by insurance from 12 percent up to 15 percent.
Head of Azerbaijan Banks Association Zakir Nuriyev said the decision will cover only deposits in the national currency (the manat), while interest rate cap for dollar deposits (which currently stands at 3 percent for deposits in foreign currency), will remain unchanged.
Nuriyev also said that the country sees no need in increasing 4 percent margin, which is currently applied in the definition of the exchange rate of the manat against foreign currencies, as the present level suppresses speculations in the market. Moreover, the margin allows banks to realize their means with an income of 4 percent.
Central bank of Azerbaijan limited the corridor of defining the exchange rate to the level of 4 percent (minus 4 percent for buying and plus 4 for sale) based on the official rate of the CBA.
The measure was taken to stop currency speculations, including the groundless increase of rate in exchange offices of the country. Exchange offices are not allowed to buy the USD cheaper than 1,572 manat, while the upper limit for sale is 1,703 manat.
The recently adopted law “On full insurance of deposits” envisages that within three years, the public deposits, with the annual interest rate not exceeding the maximum level set by the Council of Trustees of the ADIF should be insured, regardless of the amount of deposits in banks that are fund-members.
Meanwhile, the CBA increased the interest rate from 9.5 percent to 15 percent starting September 14.
The change is expected to stimulate the attraction of deposits in national currency, stop the process of dollarization and influence the agiotage, which was connected with the conversion of means to the USD.
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Nigar Abbasova is AzerNews’ staff journalist, follow her on Twitter: @nigyar_abbasova
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