Tehran: Iran will merge five lenders linked with military institutions into state-run Bank Sepah amid a wider push by President Hassan Rouhani for the armed forces to divest from businesses.

The entities being consolidated include Ansar Bank, Ghavamin Bank, Hekmat Iranian Bank, Mehr Eqtesad and the Kowsar financial credit institution, the Central Bank of Iran said in a report on its website Saturday.

“Bank Sepah is one of the reputable government banks” and this is “an important step with a view to maintaining stability and the health of the banking system,” the regulator said.

Iran’s banks came under pressure before the nation signed the 2015 nuclear agreement with world powers that lifted international sanctions. To attract customers and deposits, some banks have been offering interest rates exceeding 20 per cent.

Iran’s economy and currency have been hit since the US withdrew from the nuclear accord, known as the JCPOA, almost a year ago and reimposed economic sanctions. The Iranian rial lost almost 70 per cent of its value in the unregulated market last year, prompting a crack down on currency manipulators.

The merger of banks “is a positive development that reflects the serious debate taking place in Iran about the perils of mixing money and politics,” said Esfandyar Batmanghelidj, founder of Bourse & Bazaar, a news website which tracks developments in Iran’s economy.

“By consolidating these banks, it becomes easier for the Central Bank to enforce regulations on investment activities and financial transparency.”

The return of US sanctions is impeding Iran’s ability to integrate itself into the international banking system.

Iran’s economy also has been impaired by “deficient” anti-money laundering rules and counter terrorism financing infrastructure, according to IHS Markit, as well as by the “widespread and opaque influence” of commercial and banking entities tied to the Iranian Revolutionary Guard Corps, deemed by the US as sponsoring terrorism in the Middle East.

Last year, Rouhani said Iran’s armed forces, some of which are under US sanctions, must withdraw from their commercial holdings to help save the nation’s economy. The Guards, a powerful military organization, controls a range of local businesses such as companies in the energy, telecommunications and infrastructure sectors.

Local banking experts have called for a merger of a number of banks with healthier ones. Tehran-based Bank Sepah was founded in 1925 and is one of the country’s oldest lenders.