Loan interest rates vary depending on the loan type, term, amount and even the bank to which the loan will be used. Banks are trying all channels to convert their deposits into an interest in the fastest way by making various campaigns and advantages to gain customers.
Of course, it is not possible for a bank to determine the loan interest as it wishes. Banks have upper and lower limits, and limits are determined according to the regulations of the Banking Regulation and Supervision Agency.
The protection of competition and market conditions
Interest rates, as we have said is kept at a certain level to be kept stable. Although the public authority does not have a clear pressure on the upper limit, interest is paid to the lower limits. Moreover, no bank will raise interest at its own initiative.
Because there are many players in the market, especially the banks with a high level of state shares are not as profitable as private banks, and their interest will be at the lowest point of the legal boundaries. And since the interest rate is important for the customer, it will not matter much from which bank to use the loan. As a result, the bank, which attempts to increase credit, cannot sell loans at all and seriously damages.
Banks start to pay deposit interest from the moment they enter their cash in the money they collect from their depositors. We could not sell credit to the depositor, so there is no luxury to say that we will not be able to pay your deposit interest. For this reason, it is necessary to quickly evaluate the deposits they collected with credit instruments. Here, loan interest rates are determined depending on this factor.
If deposit rates are high in a country
Loan rates will also be high. Since banks will pay higher interest to depositors, they also get more interest from borrowers.
From here, it is clearly seen what the bank does. Real persons or businesses want to evaluate their experience. On the other hand, the needy seek funding, which they can pay after a certain period of time or in certain installments, in return, where they agree to pay some difference.
If the needy people go into a direct exchange with the accumulators, this situation causes the emergence of “banker”, the name of usury, in the past, which caused serious problems all over the world. Uncontrolled money flow, unstable financing market, and very serious rights exploits occur.
Banks are financial institutions that bridge the gap between needy and savings and profit from the difference. Of course, there is also their own money in the bank. However, this is used to grow as capital or transferred to partners as profit.
As a result, banks will be in pursuit of maximum profit or loss on the other. Because a bank that cannot sell loans faces the risk of sinking in a short time. The Banking Regulation and Supervision Board restrict the bank’s loan interest rates so that the profit asymmetries between banks are based on the service standard and customer satisfaction.
Both the consumer and the industry begin to act in a general balance
Otherwise, while the bank will sell loans at a rate close to the interest paid to the depositor in order not to make losses, it will decrease the profits in the sector in general and the fragility of the sector will increase significantly. Conversely, unsupervised banking carries the risk of cartels occurring in the sector, and that banks can apply very low-interest rates on deposits and high-interest rates on loans.
As a result, loan interest rates may vary with small differences within the limits drawn by the BRSA depending on market conditions. Although banks cannot cut interest rates, they try to offer attractive opportunities to their customers by introducing different advantages.