DETERMINANTS OF INTEREST SPREAD EVIDENCE FROM BANKING INDUSTRY OF PAKISTAN

Abstract

Purpose: This research paper aim to examine the influence of cash reserve requirements (CRR), quality of management (MQ), other costs (OC), risk credit (CR), Bank size (BS), Liquidity risk (LR) and net interest income (Nil) on interest rates spread (IRS), this study is taken a Pakistani commercial banks. Methodology & Design: Ten years data is taken from 2009 to 2018 to empirical test variable model. The variables of study include cash reserves requirement, management quality, other cost, credit risk, bank size, liquidity risk and net interest income. Findings: Empirical evidence suggest statistically significant relationship of cash reserves requirement, credit risk, bank size and net interest income on interest rate spread. Management quality, other cost and liquidity risk have statistically insignificant impact on interest rate spread. Limitations: Our current study would not include all banks. Implication: Results are instants for policy makers. The credit risk should be given due significance gives it negatively hampers interest spread. Moreover Net interest income shall improve interest spread.