(Saturday, September 13, 2025)
10:25
TEHRAN, Sept 11 (NIPNA) – A thorough understanding of banking contracts is critical for borrowers in Iran’s industrial sector, with potential implications for preventing factory closures, according to Amir Kargar, a member of the Iranian Bar Association.
Speaking at a specialized panel on legal challenges in the plastics and petrochemical industry during the 19th IranPlast exhibition, Kargar warned that more than 100,000 industrial units have been forced to shut down due to disputes over loan repayments—closures that could have been avoided if companies were aware of their contractual rights.
“Any document signed with a bank—even handwritten—can be enforceable like an official contract, allowing banks to pursue claims rapidly through legal channels,” Kargar explained. He emphasized the importance of understanding the terms and guarantees embedded in banking documents to avoid unexpected financial burdens.
Kargar noted common practices that disadvantage borrowers, such as banks charging 2–5 percent above the agreed interest rate, which violates Central Bank regulations. He stressed that such excess interest can be legally contested and recovered. Similarly, banks often block a portion of loans as collateral—sometimes up to 20 percent—while charging interest on the full amount, which can also be challenged through legal avenues.
The legal expert highlighted other contractual pitfalls, including escalating penalties for late payments and banks’ failure to fully honor loan disbursements. “Banks are legally bound to uphold their agreements, and unilateral deviations can be contested,” Kargar said.
He also criticized what he termed “formalistic profit-sharing” practices, where banks impose undue costs on borrowers, such as insurance or transport expenses, instead of proportionately sharing them as partners in investment projects. Borrowers can legally reclaim these costs if they are proven necessary and legitimate.
Regarding collateral, Kargar underscored that banks are required to accept securities relevant to the purpose of the loan. The use of unrelated collateral can be challenged through legal mechanisms under Iran’s industrial production protection framework.
“Awareness of banking rights is not merely procedural—it can directly impact industrial survival and economic continuity,” Kargar concluded, urging companies to actively engage in legal education to safeguard operations.