Relationship of KIBOR With Banking Sector in Pakistan

The objective of this research is to study the impact of changes KIBOR on the profitability of banks operating in Pakistan and analyzing the financial condition of five major banks for the period 2002 to 2011. Changes in interest rates discourage automatically saving and investment on the one hand, and raises concerns about the effectiveness of the bank lending channel of monetary policy on the other. Variables were considered, on the basis of previous studies on articles and research papers. In the model, I chose interest rates; loans and advances balance with other banks, loans to financial institutions and investment as independent variables. Regression model was tested to examine the fluctuations in interest rates that have significant impact on the profitability of banks, and expected outcome would be that there is a significant effect of changes in interest rates on bank profitability.