Central Bank of Iran data show that term deposits are growing over sight deposits, yet another indication that people keeping their money in banks for longer periods.
Total term deposits were 34,760.7 trillion rials ($128.7 billion) by end of the eighth calendar month on Nov. 21 -- 43.5% higher on the same period last year. Sight deposits climbed 38.3% to reach 7,659.7 trillion rials ($28.3b) during the same period.
Term deposits lagged behind sight deposits in the past two years as steep volatility in asset markets pushed depositors to invest in safe havens like stocks, gold and foreign currency market in pursuit of higher returns.
Comparing two sets of data show that term deposits rose annually by 29.6% by end of the reviewed period last year (Nov. 21 2020) while sight deposits grew 90.7%. the new figures indicate a shift in the resilience of deposits at banks.
CBI data categorizes term deposits into long-term, short-term and Qarzol-Hassanah (interest-free) deposits. Accordingly, short term deposits stood at 12,670 trillion rials ($47b) by Nov.21, up 37.6% on an annualized basis. Long-term deposits rose to 18,414.9 trillion rials ($68.2b), 46% higher annually.
As per the data, total Qarzol-Hassanah deposits increased 46% in 12 months to Nov. 21, reaching 2,693.7 trillion rials ($9.9b).
The fact that pace of sight deposits is losing momentum and term deposits are doing better is partly indicative of decline in inflation expectation compared to the corresponding period last year when asset markets were rallying as never before.
With stocks, currency and gold markets being stuck in recession last year and volatility in these markets tamed, depositors apparently preferred to keep their money in banks rather than invest in the risky forex and stock markets, despite the fact that the interest banks offer at best is less than half the annual inflation.
Interest on one-year maturity deposits is 16% and two-year deposits 18%. On short-term deposits with 3-month maturity, the rate is 12% and 14% on six-month deposits.
Thanks to the liquidity tsunami in financial markets, currency, gold and share prices rocketed last year.
Money Supply
Decline in inflation expectations can also be inferred from the recent CBI data. The two main components of money supply, money (M1) stood at 8,398.3 trillion rials ($31b) rising 36.2% in the month ending Nov.21 compared to the corresponding period of last year, it said.
On the flip side, near money (M2) was in the region of 34,760.7 trillion rials ($128b) increasing 43.5% on annualized basis.
M1 is the money supply that is composed of currency, demand deposits, other liquid deposits—which includes savings. M1 includes the most liquid portions of the money supply because it contains currency and assets that either are or can be quickly converted to cash.
M2, also called near-money, refers to less liquid assets that can be quickly exchanged for cash. Examples are bank certificates of deposit and treasury bills.
