International Journal For Multidisciplinary Research

E-ISSN: 2582-2160   •   Impact Factor: 9.24

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Volume 8 Issue 2
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Risk-Based Pricing in Indian Banking: An Empirical Analysis of Credit Risk, Interest Spreads and Lending Behaviour

Author(s) Mr. Akash Mallick, Dr. Ranjit Kumar Paswan
Country India
Abstract Risk-based pricing has emerged as a vital factor for the Indian banking industry, where the lending rates are being adjusted according to the risk profile of borrowers. However, there is a research gap identified for studying the extent of impact of credit risk factors on the spreads of interest rates and lending practices of various categories of banks operating in India. This study aims to assess the relationship between credit risk, risk-based pricing, and lending practices of Indian banks. The study is based on secondary data collected from 2010 to 2024, covering 30 banks, including public sector, private sector, and a few foreign banks operating in India. With the help of panel data econometric methods like fixed effects and random effects models, the impact of critical credit risk indicators such as non-performing assets, capital adequacy ratio, and loan loss provisions on interest spreads and credit growth is examined. The results of the study revealed that higher credit risk leads to wider interest spreads, and public sector banks tend to have rigid interest spreads compared to private sector banks. Moreover, risk-based pricing is also observed to influence cautious lending behaviour, especially in times of financial stress. The significance of developing better credit risk assessment mechanisms and adopting dynamic pricing strategies to build better banking efficiencies is also emphasized.
Keywords Risk-Based Pricing, Credit Risk, Interest Spread, Lending Behaviour, Indian Banking
Field Business Administration
Published In Volume 8, Issue 2, March-April 2026
Published On 2026-04-12
DOI https://doi.org/10.36948/ijfmr.2026.v08i02.74305
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E-ISSN 2582-2160
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