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By Trend

While a group of observers suggests that the recent directives by Central Bank of Iran (CBI) on reducing the interest rates could boost the equity and alternative markets, a market expert is skeptical of such possibility.

"Considering the earlier attempts by the Central Bank of Iran to cut the interest rates and the failure of banks to observe such directives, I do not believe that the recent decision will push the depositors’ move to the capital market," Hamid Mirmoeini, an Iranian market expert, told Trend.

The CBI issued a new directive on Aug. 23, setting a deadline for country’s banks to reduce their deposit interest rates to 15 percent.

Earlier, in the interview with Trend, Bahaoddin Hosseini Hashemi, former CEO of the Bank Saderat Iran, had said that the directive could lead depositors’ move to alternative markets, including the equity market.

Hamid Mirmoeini, however, dampened the speculation, saying that a single decision like the interest rate cuts is incapable of encouraging the depositors’ investment in the capital market.

"In general, the alternative markets in Iran, including stock exchange, currency and gold, as well as housing markets, have failed to entice investors," stated Mirmomeni.

The CBI has obliged the country’s banks and credit institutions to implement the directive as of September 2.

Under the directive, banks and credit institutions are obligated to adhere to the long- and short-term deposit rates set respectively at 15 percent and 10 percent.

Over the past year, the Iranian banks had announced downward revisions on the deposit interest rates at least twice.

The first downward revision came in early 2016, when the banks decreased the interest rates on deposits from 20 to 18 percent.

Later in June of 2016, banks had, again, announced that they were going to cut down interest rates to 15 percent, following the government’s breakthrough in tackling the inflation.

Nevertheless, most of the banks have reportedly failed to observe the earlier made decisions on cutting of the interest rates.

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