Effects of Interest Rate On The Profitability of Deposit Money Banks

Deposit money banks tend to wield tremendous influence on every nation’s financial landscape. This makes them the primary focus of the monetary authorities in the task of managing the country’s economy. As financial intermediaries they serve as a conduit through which funds are drawn from surplus economic entities for allocation to deficit economic units. The essence of financial intermediation is to facilitate the process of economic growth and its concomitant economic development, all things being equal. A critical factor in the act of financial intermediation is interest rate, which is the compensation borrowers pay to lenders for making use of their money for a period of time after which the initial amount they borrowed is returned to the lender.