Bank Melli Iran to set up debt collection agency

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Bank Melli Iran, the country’s largest commercial lender, is set to set up a company to recover its non-performing loans, a board member of the public bank has announced.

The debt collection agency will be formed to settle the loans and “reduce them as much as possible”, Barat Karimi also said, as quoted by the official BMI news site.

Noting that NPLs freeze a bank’s assets, Karimi added that recovering them would bring lost capital back into circulation, which would also benefit the bank’s customers.

“Bank Melli is currently using the usual means of tracking bad debts, while the planned company will expedite the process,” he said.

“Bank Melli is currently using the usual means of tracking bad debts, while the planned company will expedite the process,” he said.

In early May, BMI chief executive Mohammad Reza Hosseinzadeh announced that the bank’s ratio of non-performing loans to total loans stood at 7.7%, about 3% below the system’s average ratio. national bank.

Problem loans have proven extremely problematic for Iranian lenders, who make up a significant portion of bank assets.

When asked if setting up a separate entity for NPL collections would ultimately prove profitable for Bank Melli, Karimi noted that the idea of ​​setting up such a company has been around for some time.

“The purpose of this company will be to recover [bad] loans in small volumes and since the compensation for these loans will be in the form of cash, the income generated for the bank will be very high and therefore the establishment of such a company will be economically viable,” he added.

Pointing out that technical steps have been taken to create the debt collection agency, the BMI board member said he was “confident” that the positive ramifications of the business will outweigh its costs “because that the positive results of such a move have been seen in other banks.” Karimi said he hopes the company will begin operations in the current fiscal year (started March 21).

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