INTEREST RATE AND LOAN REPAYMENT IN SOME SELECTED COMMERCIAL BANKS IN OGUN STATE NIGERIA

Abstract

Nigerian banks play intermediary roles of channelling funds from surplus unit of the economy to the deficit unit of the economy at a cost called lending rate. The Lending rate represents the price of loans extended to borrowers by commercial banks. The objectives of the study were to determine the effect of interest rate on the lending capacity of commercial banks and to establish the relationship between interest rate and loan size of customers. Both primary and secondary sources of data were used for this study based on the hypotheses. The study concluded that the rate of interest on loan led to failure in prompt repayment thus making recovery to be slow; the result also showed that interest rate has a relatively significant influence on the repayment capability of the customers. It was recommended that there should be a continuous improvement on interest rate as a requirement to enforce compliance with policies and regulations.