Proposal for \"Rationalizing\" The Rate of Profit of Bank Loans: A Critique

In winter 1383, the center for Research of Majlis Shura Islamic of Iran (CRMSII) published a proposal on the logic of the prevailing profit rate that the commercial banks pay/charge on long-term bank loans requiring the executive branch of Islamic Republic to lower the average rate of profit by 4.5 percent within 18 months of passage of the bill by Majlis, to reduce government budget deficit by 20 billion rials, to reduce another 4% in the profit rates all within two years after passage of the bill and to provide quarterly report to the Majlis on implementation of the law by the executive branch. In what follows, I would state and examine both empirically and theoretically, the validity of the arguments in support of legislative action on defending the rates of profits charged and paid by the banks.JEL: G21 G28, G24 H81.