04-26-2007, 11:10 PM
Dear Shoaib,
I mean to say that if SBP rate (base rate) is almost 10 to 12 percent and the lending bank also includes 2 percent spread in the base rate and thereafter nominal interest rate is charged to the customer at 14 percent then where does inflation go.
In my view, it is embedded in the SBP's rate and the spread of the lending bank. It cannot be separately identified unless the SBP and lending banks disclose their real interest rates and inflation factor embedded there-in.
I mean to say that if SBP rate (base rate) is almost 10 to 12 percent and the lending bank also includes 2 percent spread in the base rate and thereafter nominal interest rate is charged to the customer at 14 percent then where does inflation go.
In my view, it is embedded in the SBP's rate and the spread of the lending bank. It cannot be separately identified unless the SBP and lending banks disclose their real interest rates and inflation factor embedded there-in.
