Determinants of Interest Rate Spreads in Nepalese Commercial Banks
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This study has examined determinants of interest rate spreads of commercial banks in Nepal using the panel data of 7 commercial banks over the period of 6 years (2010-2015). This study has employed the pooled OLS model, fixed effect model and random effect model to investigate the bank-specific variables affecting interest rate spread. The estimated regression models reveal that default risk, profitability and bank size have significant and positive impact on interest rate spreads. Cash reserve requirement has negligible effect on interest rate spreads. Thus, this study concludes that the major determinants of commercial banks’ interest rate spreads are default risk, profitability and bank size in Nepal.
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