Central Bank of the Islamic Republic of Iran

The Central Bank of the Islamic Republic of Iran (Persian: بانک مرکزی جمهوری اسلامی ايران, Bank Markazi Jomhouri Islami Iran) is the central bank of Iran. It is entirely government owned.

History

The Ilkhanate were one of the rulers of Iran that tried to introduce paper currency in Iran in the late 13th century, without success.

In modern banking, the British first opened the Imperial Bank of Persia in 1889, with offices in all major cities of Persia and India. To compete with the British bank, Imperial Russia also opened the Russian Loan and Development Bank.

The first state owned Iranian bank, Bank Melli Iran was established in 1927 by the government of Iran. The bank's primary objective was to facilitate government's financial transactions and to print and distribute the Iranian currency (rial and toman). For more than 33 years, Bank Melli Iran was acting as the central bank of Iran with the responsibility to maintain the value of Iranian Rial.

In August 1960, the Iranian government established the Central Bank of Iran (CBI) and separated all central banking responsibilities from Bank Melli Iran and assigned it to the newly formed central bank.

The Central Bank of Iran was renamed to "the Central Bank of the Islamic Republic of Iran" immediately after the Islamic revolution and the overthrow of the Shah of Iran. Scope and responsibilities of the Central Bank of the Islamic Republic of Iran (CBI) have been defined in the Monetary and Banking Law of Iran

CBI maintains a museum of historic and ancient jewelry owned and used by the ex-kings of Persia. This museum houses the Imperial Crown Jewels and is one of the most appealing tourist attractions in Iran.

Governors of the Central Bank of Iran


Governor
Date
Ebrahim Kashani
1960
Ali Asghar Poor Homayoon
1961
Mahdi Samii
1964
Khodadad Farmanfarmayan
1969
Mahdi Samii
1970
Abdolali Jahanshahi
1971
Mohammad Yeganeh
1973
Hassan-Ali Mehran
1975
Yoosef Khoshkish
1978
Mohammad Ali Molavi
1979
Alireza Nobari
1979
Mohsen Nourbakhsh
1981
Majid Ghasemi
1986
Seyed Mohammad Hossein Adeli
1989
Mohsen Nourbakhsh
1994
Mohammad Javad Vahhaji (acting)
2003
Ebrahim Sheibani
2003
Tahmasb Mazaheri
2007
Mahmoud Bahmani
2008

Objectives

Objectives
The objectives of the Central Bank of the Islamic Republic of Iran as per its charter and according to section 10 of the Monetary and Banking Law of Iran are as follows:
Maintaining the value of national currency
Maintaining the equilibrium in the balance of payments
Facilitating trade-related financial transactions
Improving the growth potential of the country

Islamic banking

In a country where the government claims to follow the strict Islamic principles, running a traditional banking network would be against the fundamental teachings of Qur’an. Therefore, immediately after the Islamic Revolution, the Central Bank was mandated to establish an Islamic banking law. In 1983 the Islamic Banking law of Iran was passed by the Islamic Majlis of Iran. According to this law, Iranian banks can only engage in interest-free Islamic transactions (interest is considered as usury or riba and is forbidden by Islam and the holy book of Qur’an). These are commercial transactions that involve exchange of goods and services in return for a share of the assumed "profit". Iran uses what are officially termed "provisional" interest rates, as rates paid to depositors or received from borrowers should reflect the profits or losses of a business.
All such transactions are performed through Islamic contracts, such as Mozarebe, Foroush Aghsati, Joale, Salaf, and Gharzol-hassane. Details of these contracts and related practices are outlined in the Iranian Interest-Free banking law and its guidelines. This law describes and authorizes an Iranian Shiite version of Islamic commercial laws. Iran’s banking system adheres to Islamic rules that prohibit earning or paying interest.

Critics believe that this law has simply created the context for legitimizing usury or riba. In reality all banks are charging their borrowers a fixed pre-set amount at a rate of interest that is approved by the Central Bank at least once a year. No goods or services are exchanged as part of these contracts and banks rarely assume any commercial risk. High value collateral items such as real estate, commercial paper, bank guarantees and machinery eliminate any risk of loss. In case of defaults or bankruptcies, the principle amount, the expected interest and the late fees are collected through possession and or sale of secured collaterals.