The Analysis of Legal Validity and Nature of Re-Discount in the Banking System of Iran

Nowadays the monetary policy of the central bank of Iran (i.e. control and moderation of the volume of credits) in light of real requirements of economy is the key function of the central bank and one of the most popular tools in this area is to re-discount. In re-discount, valuable papers and documents which have been discounted by their owners with the standard bank interest rate,are being rediscounted by commercial banks for the second time before Central Bank with an interest rate which are determined under the title of re-discount rate’’. In the usury-free banking in Iran, purchasing the true and time-bound commercial documents from customers and re-selling them with a cost which is less than the central bank can pave the way for the augmentation of the volume of facilities for the banks. But, by ratification of the usury-free banking operations law, the utilization of the instrument of re-discounting totally got outdated or null and voids and from the year 1980 it has been omitted from the inventory of the monetary policy of instruments of Iran. The present essay holds that since according to the known fatwas by the Shiite canonists and the Guardian Council of Iran if the debt is real negotiate it (i.e. debt negotiation or settlement) for a price which is less than its nominal value is permissible and the license for making use of it is granted in the banking system; therefore, it is appropriate to annex the instrument of re-discount as one of the instruments of the monetary policy to the banking code of Iran.

Keywords:

Discount , Re-discount , Central Bank , Monetary Policy.