04-27-2007, 02:03 AM
(I try to produce things in simple form and may be I'm subject to som basic mis conceptions)
A bank borrows money from state bank or other commercial banks at KIBOR. Plus the deposit with the bank comprises the money that is to be lent by the bank. The state bank in pursuit with its monetary policy aims determines KIBOR. So, KIBOR is the lending cost of the lending bank. It adds its spread (which is also determined in accordance with state bank's policies) to the KIBOR and lends money at that rate. The interest rate on financing offer letters is generally mentioned as KIBOR + 2%. So, this 2% is basically the main source of income for the bank.
Now what is nominal rate? It is KIBOR plus the percentage added by the bank. For instance we say that KIBOR is 10%, lending banks spread is 4% and inflation is 8 %.
Now nominal rate is 14% and real rate is 6%. (The concept of bps was useful addition to my knowledge)
Another important point is, the difference between the percentages at which banks are lending money and that the give to depositors. Despite claiming record-breaking profits and sbp's warnings no reduction in this gap is seen. I wonder what sbp is relying of giving warnings and not directly taking action.
A bank borrows money from state bank or other commercial banks at KIBOR. Plus the deposit with the bank comprises the money that is to be lent by the bank. The state bank in pursuit with its monetary policy aims determines KIBOR. So, KIBOR is the lending cost of the lending bank. It adds its spread (which is also determined in accordance with state bank's policies) to the KIBOR and lends money at that rate. The interest rate on financing offer letters is generally mentioned as KIBOR + 2%. So, this 2% is basically the main source of income for the bank.
Now what is nominal rate? It is KIBOR plus the percentage added by the bank. For instance we say that KIBOR is 10%, lending banks spread is 4% and inflation is 8 %.
Now nominal rate is 14% and real rate is 6%. (The concept of bps was useful addition to my knowledge)
Another important point is, the difference between the percentages at which banks are lending money and that the give to depositors. Despite claiming record-breaking profits and sbp's warnings no reduction in this gap is seen. I wonder what sbp is relying of giving warnings and not directly taking action.
