Central Bank of Iran raises banks' reserve requirement ratio in fresh move to slow money creation

Mehr News Agency reported on Tuesday 28 July 2026 that the Central Bank of Iran has raised the reserve requirement ratio on bank deposits by 1.5 percent. The reserve requirement is the share of a bank's resources that must be held at the central bank and cannot be used directly for lending or investment.

Raising the ratio locks up part of the banks' resources and reduces their capacity to extend new credit. The result is a lower money multiplier and a slower pace of new money entering the economy, a contractionary policy that, if supported by other tools, can help ease the path of inflation.

Citing analysts, Mehr noted that the effectiveness of the instrument depends on the overall condition of the banking network. If banks face chronic liquidity shortages, frozen assets or large non performing loans, they may resort to overdrafts from the central bank to cover the funding gap, which would neutralise part of the policy's contractionary effect.