Interest Rate Capping and Performance of Commercial Banks in Bangkok, Thailand
DOI:
https://doi.org/10.53819/81018102t5274Abstract
Interest rate capping is a regulatory mechanism designed to limit the maximum interest rates that banks can charge on loans and credit products, with the primary aim of protecting consumers from usurious practices. However, this practice presents a complex challenge as it can impact the profitability of commercial banks by constraining their interest income. To thrive in this regulatory environment, banks should balance profitability concerns with the imperative to provide fair and accessible financial services to their customers while complying with interest rate caps. The study adopted the descriptive research design. The target population was 25 commercial banks in Bangkok, Thailand. The study did sampling of 20 respondents that were chosen from the target population of 25 commercial banks in Bangkok, Thailand. Questionnaires were used to gather the data. In conclusion, the relationship between interest rate capping and the performance of commercial banks in Bangkok, Thailand is a delicate balancing act. While interest rate capping seeks to protect borrowers and promote financial stability, it can also pose challenges to the profitability of commercial banks. The ultimate success of this regulatory practice hinges on the ability of banks and regulators to collaborate in creating a regulatory environment that safeguards the interests of consumers, maintains financial stability, and fosters a competitive and sustainable banking sector. The study recommended that Thailand should implement a flexible regulatory framework that allows for periodic reviews and adjustments of interest rate caps based on economic conditions. Commercial banks should focus on effective risk management, adopting advanced credit assessment tools and diversifying revenue streams through innovative financial products to mitigate the impact of reduced interest income. Additionally, promoting financial education and enhancing consumer protection measures will empower borrowers to make informed financial decisions while ensuring transparent lending practices in a regulated environment.
Keywords: Interest Rate Capping, Performance, Commercial Banks, Thailand
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