Iran’s Central Bank has entered the political fray pitting President Hassan Rouhani’s government against his conservative, hard-line opponents.

Iran’s dubious savings and loan financial institutions, with questionable or no banking credentials, have long been at the center of controversies. Some of these outfits have failed to pay depositors and daily public protests have been met either with neglect or police intervention.

Iran’s Central Bank has weighed in by accusing Rouhani’s opponents of spreading financial panic to weaken the government.

On his Twitter page, Iran Central Bank’s spokesman accused big debtors of state banks as well as some of President Rouhani’s opponents of fomenting public distrust of the banking system and instigating mass cash withdrawals. He warned that these actions are meant to create a crisis for Rouhani's government.

The spokesman, Ali Karimi claimed on June 22 that bank debtors and opponents who believe a public run on banks would challenge the government have prepared a nightmare for the country.

“We will suppress the sedition,” Karimi added, without elaborating further.

For years, politically powerful individuals have taken huge loans from state banks and never paid back. This has forced the Central Bank to prop up weak banks. In some cases, it is suspected that debtors have simply transferred the borrowed money overseas.

The Central Bank’s comments are seen as a reaction to conservative media outlets, who have circulated rumors about the insolvency of Iranian banks.

Reports concerning protest gatherings of depositors in front of Thamen Credit Institute and its branches in various Iranian cities, including Tehran and Ahvaz, were widely covered in the conservative media.

A day earlier, several depositors at Caspian Financial Institute also assembled in the streets leading to Pasteur Avenue, where the presidential offices are located. They were angrily demanding their deposits back.

“Rumors about the insolvency of the banks have been circulating among people for months and, from time to time, comments made by government officials have also intensified these [rumors] and led to concern for people on social media,” Tasnim, a news website close to the Islamic Republic Guardian Corps (IRGC) reported on June 17.

Comments made by Central Bank Governor Valiollah Saif, regarding a potential merger of troubled banks exacerbated these rumors, according to Tasnim.

The article was removed from Tasnim's website hours after publication.

Two days later, the Central Bank stated the bankruptcy rumors were fabricated and spread for personal and political purposes.

The government’s official news website, IRNA, published the statement and, after referring to Central Bank’s efforts to tackle the problem of unlicensed financial institutions, reported that most of these institutions “avoided accountability to the Central Bank, for their managers and shareholders are related to the centers of power.”

The question of financial institutions or pseudo banks were raised several times, during and after the recent presidential debates.

Rouhani and his government’s opponents partly blame the Central Bank for its failure to supervise these institutions. The government says that it wants to prosecute illegal credit and financial institutions, but it also refers to their ties to power centers including the judiciary and Basij militia.

During his last presidential debate on May 12, Hassan Rouhani claimed that Mizan Credit Institution is related to the judiciary. “Mizan wasted a lot of the government’s time for returning people’s deposits,” Rouhani asserted.

The judiciary denies having any relations with Mizan. Nevertheless, Mizan’s first logo was exactly the same as the judiciary’s.

“Mizan is related to several judges serving at the judiciary and some of its branches are located at the offices of the Justice Ministry,” said an MP, Mohammad Dehqan.

Mizan, with one million accounts and 3,200 billion Tomans (almost $1 billion) in assets was bankrupt and disbanded in 2015.

The Central Bank has time and again warned the public against unlicensed financial institutions, which control 20 percent of Iran’s total cash flow.

“To buy time and as a delaying tactic, some of these banks and financial institutions that are at the verge of bankruptcy and insolvency offer higher interest rates,” said Saif, the Central Bank’s governor.

About a year ago, the Iran Parliament’s Center for Research declared that Iran’s banking system is in a critical situation and warned that the risk of insolvency threatens all Iranian banks.

Out of 7,333 financial institutions in Iran, only 1000 are licensed, the Center reported.

In the same report, it said “Six unlicensed financial institutions control nearly 13,300 billion Tomans ($4.1 billion) which is equal to 6 percent of the total assets of all Iran banks.

“Lower interest rates will hit depositors as well as banks,” said Saif. “Depositors will receive less interest on their deposits, and are more likely to pull their money out of banks as it would no longer be profitable for them…causing the banks to go bankrupt.”