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However, Iran still lacks a well-functioning banking sector that enables it to absorb massive FDI to help diversify the economy. The country is still trying to reform its banking sector after years of unhealthy practices under the Ahmadinejad administration. To pursue these goals, the Central Bank of Iran is seeking to increase regulatory stranglehold over the sector. First, the laws will increase transparency within the banking sector, which would enable the CBI to more closely monitor interest rates that banks offer, as the latter frequently violate the rates set by the CBI to compete for deposits.Feeling it was safe to cut rates without sending inflation soaring again, the CBI began to cut the interest rate ceiling from 22 to 20 percent in April 2015, then to 18 percent in February 2016 and 15 percent in June.Nevertheless, this law caused uproar in September, when Bank Mellat and Bank Sepah, two of Iran's largest banks, allegedly declined to serve an IRGC-linked subsidiary that had been sanctioned by the United States, later receiving a green light from the CBI to resume their transactions. Greater authority for the CBI under the proposed bills might enable it to push for further discipline in the sector.
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