The law capping lending rates and setting a floor for deposit rates has predictably caused a drop in commercial banks’ earnings, but it must be let to run its full cycle. The new law was put in place because commercial banks had for many years failed to regulate themselves in a manner that kept the price of money within the reach of most borrowers.
Interest rates control existed up to the early 1990s, but were allowed to move on the basis of market sentiments as part of wider economic reforms.
