Tehran's Friday prayer leader has called for an immediate end to commercial banks drawing unauthorised overdrafts from the Central Bank and demanded reforms to the country's banking system, IRNA reported on November 7.

Hojjatoleslam Mohammad Hassan Aboutorabifard said in his sermon that controlling inflation and achieving sustainable economic growth is impossible without addressing imbalances in the banking network. He thanked judicial authorities and lawmakers for initiating the dissolution process of Ayandeh Bank.

"The first step and most important action is reforming the country's banking system," Aboutorabifard said, according to IRNA.

The cleric cited a report from the Islamic Consultative Assembly Research Centre published on September 26, 2023, which flagged Ayandeh Bank's deteriorating financial condition. The bank had accumulated IRR800tn in overdrafts from the Central Bank by June 2023 and recorded a negative 140% capital adequacy ratio in 2022.

According to the Central Bank governor, Ayandeh Bank alone accounted for 42% of the entire banking system's imbalances and 42% of total overdrafts from the Central Bank before its dissolution.

Aboutorabifard said the bank had become "a centre of imbalance in the banking network" due to accumulated losses, widespread debt and unprecedented overdrafts from the Central Bank.

He called for Central Bank independence, arguing the institution cannot be held accountable without autonomy. "In the first step, unbalanced banks' encroachment on Central Bank resources must be stopped," he said.

The Friday prayer leader said banking sector problems stem from budget deficits and called on the government to reduce treasury spending and improve resource allocation. He noted the Planning and Budget Organisation and President Masoud Pezeshkian are committed to budget reforms.

Aboutorabifard warned that monitoring of troubled banks must be strengthened to prevent similar cases. He said proper oversight of the Ayandeh Bank dissolution and its merger with Bank Melli could serve as a model for removing other severely distressed banks from the system.

Iran's banking sector has struggled with high levels of non-performing loans and capital shortfalls for years, with multiple state-owned and private banks requiring bailouts or restructuring.