Iranian commercial banks have agreed to cut their deposit rates in a move welcomed by the central bank, after the lifting of economic sanctions on Tehran brought hopes for a further fall of inflation and faster economic growth.

The banks decided to cut their one-year deposit rate from 20 per cent to 18 per cent, while the overnight deposit rate will fall below 10 per cent, the Fars news agency quoted Kourosh Parvizian, head of the Association of Private Banks, as saying late on Monday.

Deposit rates soared above 20 per cent during the sanctions era, when the rial currency was weak and inflation was high, but authorities have started to guide them down towards more normal levels now that the rial has stabilised.

Lower deposit rates could encourage the public to start spending and investing large amounts of money which were hoarded during the sanctions era, thus boosting economic growth, which is currently near zero.

Annual inflation has dropped to 13 per cent from more than 40 per cent three years ago and last month's lifting of sanctions, after an international agreement on Iran's nuclear programme, may further reduce inflationary pressure.

The new deposit rates will take effect on Feb. 20 subject to approval by the government-backed Money and Credit Council. In a statement, the central bank praised the decision and said it would make sure the bodies that it supervised implemented it. – Reuters