Top Banks in Iran

Today, the quantitative and qualitative growth of Islamic financial institutions is an undeniable fact of the financial and banking industry in the world. This growth is so much that it has attracted the attention and opinion of most experts and activists in this field.

Therefore, investing in Iranian banks to obtain guaranteed and, at the same time, legitimate profit from the bank seems a reasonable and low risk.

According to the latest ranking of Banker magazine for 2012, the total value of Sharia-compliant assets in the world in 2012 is equivalent to 1,267 billion dollars, of which fully Islamic banks have 1019 billion dollars. 

Iran has the highest rank in terms of the amount of Sharia-compliant assets among other countries. Iran’s value of this type of asset is 475 billion dollars, about two times that of Saudi Arabia and 2.4 times that of Malaysia. 

In addition, Islamic banks have earned a profit equal to 14.7 billion dollars with an average rate of return on assets of 1.5%.

History of the banking sector in Iran

One of the earliest forms of banking in Iran was practiced by temples and princes during the pre-Achaemenid era when trade flourished, and money was introduced.

The Achaemenid Empire (550-330 BCE) established a centralized administration and a standard currency system, facilitating banking operations across its vast territories. Darius I is known as one of the first kings who minted gold coins.

The Achaemenids also developed a postal service and road network connecting different regions and enhancing communication and commerce.

Islamic law prohibited Usury/Interest (Riba in Arabic). It encouraged trade and charity (zakat) (The act of asking for interest over the money lent is called "Riba" in Islam and is considered "war against Allah" in Islamic countries").

The bazaar became the central hub of economic activity, where merchants, moneychangers, moneylenders, and bankers operated. The bankers provided various services such as:

• Currency exchange
• Money transfer
• Credit, and deposit. 

The Safavid dynasty (1501-1736) is considered one of the golden ages of Iranian culture and commerce in which the banking system flourished. 

The Safavids established a strong central government and a stable currency (the Abbasi).

The Sarrafs (Exchangers) played a vital role in facilitating trade and finance, both domestically and internationally. They formed guilds and associations to regulate their profession and protect their interests.

The Qajar dynasty (1789-1925) caused a significant decline in the Iranian economy and banking system due to internal conflict, foreign intervention, and corruption. 

Also, World War ll weakened Qajars because of foreign government interventions and goods shortages.

In 1889, the British-owned Imperial Bank of Persia was founded with an exclusive right to issue banknotes in Iran. The Imperial Bank introduced modern banking concepts and practices to Iran, serving British interests and influence.

It's worth noting that the Imperial Bank of Persia later became the Bank Melli Iran (National Bank of Iran) under Iranian ownership rather than being a separate entity.

The Pahlavi dynasty (1925-1979) initiated a series of reforms and modernization programs that affected the Iranian banking system. 

In 1932, the Iranian government terminated the monopoly of the Imperial Bank and established the Bank Melli Iran (National Bank of Iran) as the first Iranian-owned commercial bank.

In 1960, the Central Bank of Iran was founded to govern and regulate the banking system and save the RIAL's value. The Pahlavis also encouraged private banks and foreign banks to operate in Iran.

The Islamic Revolution of 1979 brought radical changes to the Iranian banking system. The new regime nationalized all banks and transformed them into interest-free Islamic banks based on the principles of Sharia law. 

The Central Bank of Iran was restructured to conform to Islamic norms and objectives. The Iranian banking system faced many challenges and difficulties in adapting to the new system, such as:

1. Inflation
2. Sanctions
3. Inefficiency
4. Competition.

The history of banking in Iran shows how banking has evolved in response to various factors and forces. Let’s now learn about the top banks in Iran below. 

Bank Pasargad (BPI)

Pasargad Bank is the result of 8 years of thinking; founded by its managers or intellectual leaders in 2001, and from 2009, executive steps were taken to establish the bank.

The bank's first branch was officially opened in the holy city of Mashhad when Farkhunda Imam Reza was born on December 23, 2004, and began serving the compatriots.

BPI is the largest private bank in Iran. It offers a wide range of financial services, including. 

• Current savings, special, and travel accounts 
• Debit cards 
• Deposits 
• Money transfers 
• Letters of credit 
• Treasury 
• Currency exchange 
• Corporate loans syndication 
• Financial advisory 
• Electronic banking services

The bank's shareholders are 1.5 million, and 327 branches are active in Tehran and other cities.

Bank Mellat (People's Bank)

Bank Mellat was established by the approval of the General Assembly of Banks dated 1980 from the merger of Tehran, Dariush, Iran International, Imran, Iran Insurance, Iran and Arab, Pars, Cooperative and Distribution Credits, Foreign Trade and Farhangian Banks and registered under the number 38077 in the Companies Registration Office.

The registration was received, and the operational operation of the bank started on the same date.

Here are Bank Mellat's provided services listed: deposits, loans, credit cards, payment systems, foreign exchange, trade finance, investment banking, and Islamic banking.

• Banks integrated with Bank Mellat:With the merger of the banks, the initial capital of Bank Mellat reached 33 billion 500 million Rials.
• International bank network: Mellat Bank currently has 4 branches in Turkey (Istanbul, Izmir, Ankara) and South Korea (Seoul), as well as one subsidiary bank (Persia International Bank of London). 

In addition, 26.30% of the shares of the Commercial Bank of Iran and Europe located in the city of Hamburg belong to Bank Mellat.

Bank Melli Iran (National Bank Of Iran - BMI)

The establishment of a bank in a new form was first proposed to Naseruddin Shah Qajar by Haj Mohammad Hassan Amin Darul Zarb, one of the great money changers of Tehran, ten years before the establishment of Shahi Bank in 1928.

At present, the National Bank of Iran (The oldest and largest bank in Iran and the Middle East) is under the supervision of the central bank as the supervisory authority for credit institutions, and with 

• More than 2657 active branches in the country 
• 14 active branches 
• 4 subsidiaries abroad 
• 178 counters are working 

Making this bank one of the strongest institutions. The National Bank of Iran is ready to serve the nation with more than 39 thousand active employees who established the foundations of this bank with their efforts.

BMI offers a variety of banking products and services to its customers, such as current and savings accounts, Qard-al-Hasan loans (interest-free loans), Islamic bonds (Sukuk), letters of guarantee, foreign trade services, and e-banking.

Bank Saderat Iran (Export Bank Of Iran - BSI)

The history of modern banking in Iran began due to economic and political necessity.

Still, since the first Iranian banks were formed to some extent with the government's support and in line with the government's wishes and interests, they should have paid more attention to satisfying the people. 

Apart from a few people with a lot of money and capital, most preferred keeping their cash at home instead of saving their surplus funds in banks, despite all possible risks.

BSI is now one of the oldest Iranian-owned banks, established in 1952 to expand Iran's foreign trade. BSI has more than 3400 branches in Iran and also 28 overseas branches in Europe, Asia, and Africa. 

BSI provides various banking services to its customers, such as current and savings accounts, debit cards, deposits, money transfers, letters of credit, treasury, currency exchange, corporate loan syndication, and Islamic banking.

Keshavarzi Bank (Agricultural Bank of Iran or Agribank)

Keshavarzi Bank is a major Iranian banking establishment owning more than 1800 branches in Iran and specializes in financing the agricultural sector. The bank was founded in 1933 as the first specialized bank in Iran.

In 1945, at the same time as the end of the Second World War, the need for more suitable facilities in the agricultural sector arose, so the authorities made legal changes in the financial resources of the bank and its regulations.

This time, the responsibility related to (profession and art) was removed from the bank, and the name of the bank was also changed to "Agricultural Bank of Iran," the need for small credit assistance in promoting rural handicrafts was still within the scope of the bank's work.

During this period, Iranian engineers built a central building for the Agricultural Bank, which took three years to build (the former central building).

Finally, the Agricultural Bank was created by merging the Agricultural Cooperative Bank of Iran and the Agricultural Development Bank of Iran. 

According to the Nationalization of Banks Law, the legal bill for the administration of banks, and the regulations in the statute, the Agricultural Bank replaced the banks above in all cases.

Keshavarzi Bank now provides various banking services to its customers (both farmers and rural communities), such as deposits, loans, insurance, leasing, microfinance, and e-banking.

Eghtesad Novin Bank or Bank Eqtesad Novin (New Economy - EN Bank)

EN Bank was established in 2001 by a group of entrepreneurs and industrialists. It was Iran’s first private bank. Later that year, it began subscribing to shares after obtaining licenses from the Central Bank of the Islamic Republic of Iran and the Securities and Exchange Organization.

The General Assembly of the founder of Eghtesad Novin Bank was held in the same year. On August 20 of the same year, it was registered with an initial capital of 250 billion Rials in the Tehran Companies and Non-Commercial Institutions Registration Office under number 177132.

After several periods of the capital increase in previous years, by obtaining permission from the Central Bank and the Securities and Exchange Organization, the capital increase from the amount of 13,131,000 million Rials to the amount of 30,425,734 million rials was registered with Tehran's Companies and Non-Commercial Institutions Registration Department.

EN Bank aims to provide flexible and innovative financial solutions to the burgeoning Iranian private sector and provides services such as deposits, loans, foreign exchange, trade finance, project finance, leasing, and Islamic banking.

Bank Markazi (Central Bank of Islamic Republic of Iran)

It was established in 1960 to provide favorable conditions for economic progress by implementing monetary and credit policies. It also supports the government in implementing various programs, including economic stabilization and development programs.

The Central Bank of the Islamic Republic of Iran has several duties and powers according to the second chapter of the monetary and banking law of the country (and its latest amendments as a footnote):

1. Issuing common metal banknotes and coins of the country under this law.
2. Supervision of banks and credit institutions according to the provisions of this law.
3. Regulating the regulations related to foreign exchange transactions and the commitment or guarantee of foreign currency payments with the approval of the Money and Credit Council and the supervision of foreign exchange transactions.
4. Supervising gold transactions and regulating the regulations related to these transactions with the approval of the Board of Ministers.
5. Supervising the issuance and importation of Iranian currency and regulating related regulations with the approval of the Money and Credit Council.

Bank Sepah

Sepeh Bank was founded in 1925 as the first Iranian bank with a capital of 3,883,950 Rials. The first branch of Sepeh Bank was opened in Rasht that same year.

Now, with more than 90 years (almost a century) of experience as one of the most critical financial and economic institutions of the country with about 1800 branches, Sepeh Bank has been able to attract the stray funds of the society and lead them towards productive economic activities to achieve the macroeconomic goals of the country.

In the international arena, with the establishment of banking units in countries such as Germany, Italy, and France, as well as Sepeh International Bank of England, it has an advantageous position in providing banking services.

Among the essential activities of Sepeh Bank in the international arena, we can mention services such as 

• Opening various types of deposit accounts 
• Conducting foreign exchange remittances 
• Opening letters of credit 
• Issuing letters of credit 
• Covering letters of credit 
• Verifying letters of credit 
• Issuing foreign exchange guarantees

This is the oldest Iranian bank that still operates today. Bank Sepah was founded in 1925 as a state-owned bank to support industrial and commercial development in Iran. 

These are some of the top ten banks in Iran that offer diverse and quality financial services to customers across different sectors and regions. We hope you enjoyed this post and got familiar with the Iranian banking industry and its history.

Researched and authored by Mehdi Hoghoughi  | LinkedIn

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