Does transparency about banks’ lending costs lower firms’ borrowing costs? Evidence from India

Prasanna Tantri, Nitin Vishen
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Abstract

We study the impact of transparency about banks’ costs on loan interest rates. The Indian Central Bank required banks to disclose a cost-based benchmark interest rate instead of the prime rate. The banks could price loans using any spread to the cost-based benchmark. We find that this change, which made banks’ cost structures more transparent, lowers the interest rates charged and leads to increases in debtor firms’ total borrowings and investments. We hypothesize that increased cost transparency reveals relationship rents to competitor banks and makes it difficult for incumbent banks to maintain high relationship rents because of increased threat of entry.
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银行贷款成本的透明度会降低企业的借贷成本吗?印度的证据
我们研究了银行成本透明度对贷款利率的影响。印度中央银行要求银行披露基于成本的基准利率,而不是最优惠利率。银行可以利用与基于成本的基准利率之间的任何利差为贷款定价。我们发现,这一变化使银行的成本结构更加透明,从而降低了贷款利率,并导致债务企业的借贷和投资总额增加。我们假设,成本透明度的提高向竞争银行揭示了关系租金,并使在位银行难以维持高关系租金,因为进入的威胁增加了。
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