Iran is planning a major privatisation programme for its state-owned commercial banks in a dramatic move to improve efficiency and stimulate the economy. In an exclusive interview with The Banker, Mohammad Jafar Mojarad, deputy governor of Bank Markazi (central bank), discussed the prospects of a new Iranian-controlled offshore bank in Bahrain and the long-term opening up of mainland Iran to foreign banks.
In what amounts to a significant policy shift, Dr Mojarad announced that, following possible mergers between the major banks, the state-owned banks would be privatised, with half of the capital being sold to the public through the stock exchange. “The intention is to increase efficiency in the banking system, downsize the government sector and increase the private sector,” he said. One small bank, Bank Refah Kargaran, has already been privatised.
Iran has seven major banks in The Banker’s Top 1000 global banks listing and Dr Mojarad said Bank Saderat Iran, Bank Mellat, Bank Tejarat and Bank Sepah were all candidates for privatisation, which could be completed within 12-18 months. Bank Melli Iran, the largest bank in terms of assets and the best known Iranian bank, might remain the only state-owned commercial bank but a final decision on it had not yet been made, he said.
Dr Mojarad said that Bank Keshavarzi and the Bank of Industry and Mine, both specialist institutions, would remain in state hands.
While he was adamant about the 18-month timetable, market analysts were uncertain that there was sufficient appetite in the Iranian market for such a large volume of bank stocks and they doubted that the stock exchange could service the deals.
Dr Mojarad expects the privatisation process to begin soon. A government team was working on the sequencing and timing of the deals, he said. He also noted that Bank Saderat and Bank Melli planned to announce a joint venture offshore bank in Bahrain with Ahli United Bank. The new bank would be owned equally by the three banks and more joint venture banks in the Gulf region are expected to follow.
And in another significant development, Dr Mojarad outlined a timetable for foreign banks to operate in mainland Iran. At present they can only operate in free trade zones such as Kish. “Our policy is to allow foreign banks on to the mainland within three to five years, to improve efficiency and bring in more technology, ” he said. Foreign banks, however, would not be able to invest in Iranian banks in the immediate future. The bank privatisation process would be left to domestic investors only, he said.
