The Effects of Lowering the Statutory Maximum Interest Rate on Non-bank Credit Loans
| Autor: | MEEROO KIM |
|---|---|
| Jazyk: | English<br />Korean |
| Rok vydání: | 2022 |
| Předmět: | |
| Zdroj: | KDI Journal of Economic Policy, Vol 44, Iss 3, Pp 1-26 (2022) |
| Druh dokumentu: | article |
| ISSN: | 2586-2995 2586-4130 |
| DOI: | 10.23895/kdijep.2022.44.3.1 |
| Popis: | This paper analyzes the effects of the cut in the legal maximum interest rate (from 27.4% to 24%) that occurred in February of 2018 on loan interest rates, the default rates, and the loan approval rate of borrowers in the non-banking sector. We use the difference-in-difference identification strategy to estimate the effect of the cut in the legal maximum interest rate using micro-level data from a major credit-rating company. The legal maximum rate cut significantly lowers the loan interest rate and default rate of low-credit borrowers (i.e., high-credit-risk borrowers) in the non-banking sector. However, this effect is limited to borrowers who have not been excluded from the market despite the legal maximum interest rate cut. The loan approval rate of low-credit borrowers decreased significantly after the legal maximum interest rate cut. Meanwhile, the loan approval rate of high-credit and medium-credit (i.e., low credit risk and medium credit risk) borrowers increased. This implies that financial institutions in the non-banking sector should reduce the loan supply to low-credit borrowers who are no longer profitable while increasing the loan supply to high- and medium-credit borrowers. |
| Databáze: | Directory of Open Access Journals |
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