First NameWasim
Last NameMughal
Emailwasim1380@gmail.com
Supervisor NameUn khnown
UniversityUn known
CountryPakistan
Keywords Monetary Policy, Bank Lending Behavior
Publication Date29 July, 2015
DegreeBachelors
DomainFinance

Impact Of Monetary Policy On Bank Lending Behavior

Abstract

The study investigates the impact of Monetary Policy on bank’s lending behavior by using the two main components of bank’s balance sheets i.e. Advances (private sector credit) and Investments (in Government securities) from quarterly balance-sheets of banks. Policy rate for the period December 2003 to March 2013 has been used as indicator of changes in monetary policy. We found that initially commercial banks were more focused on lending to private sector because at that time (December 2003 to September 2008) market interest rates were quit low for a prolonged period of time along with influx of liquidity in the market. Banks took higher exposure in private sector risky avenues to attain a certain level of profits. However after September 2008 banks inclined towards the investment in Government securities due to rapid increase their infected loans ratio (Non Performing Loans), higher returns on risk free investments (Government securities) along with lower economic activities in the country. Correlation and trend analysis shows significant positive relation between policy rate and banks investment in Government securities and negative relation between policy rate and advances.

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