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the effects of interest rate liberalization to the risk of commercial banks in china
Finance & Accounting
Pages 20 (5020 words)
LITERATURE REVIEW The Effects of Interest Rate Liberalization to the Risk of Commercial Banks in China Interest rate liberalization Interest rate liberalization is a policy which is basically aimed to keep the costs of the funds low with a view that the cheap credit would promote the development through increased investment…
Under such method levying of extra charges of loan is not allowed. Researchers say during 1974-1978 Development Plans, the government of different countries felt the need to review the interest rate in order to encourage the savings through the bank and to create disincentive to eradicate the speculation and uneconomic use of savings by the borrowers. During 1980 the interest rate policy was used to achieve the following objectives. Firstly interest rate policy was aimed to keep the general level of interest rate positive so that savings can be encouraged and contribute to the maintenance of financial stability in real terms. Secondly it was framed to allow greater flexibility and greater competition amongst the banks and non banking financing institution in order to enhance the effective and efficient allocation of financial resources. Thirdly the policy was objected to reduce the differential and to maximize the lending’s of banks. After 1974 a review on the interest rate liberalization was done during 1980 which allowed commercials banks to get a better room to complete and to have a better flexibility to meet the need of the customers (Ngugi and Kabubo, March 1998, pp. - 9-10). As per to Feyzioglu, Porter and Takas (2009); interest rate liberalization provide with many benefits. ...
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