The Design And Testing Of Loan Pricing Method For Rural Commercial Banks

The process of interest rate marketization in China leads to the demand of rural commercial banks to research and improve the interest rate pricing method.Through summing up the theory and the practice of loan pricing methods used in the domestic and foreign commercial banks, considering the competition situation in China’s current banking market,the management level of rural commercial bank and the accumulation of data, this paper put forward the Cost Plus method considering customer relationship,that is,the loan interest rate=Funding Cost Rate+Operating Cost Rate+Expected Loss Rate+Revenue Rate-Interest, Rate Discount based on Customer Relationship.Further the paper gives the calculating method of each part of the pricing model.The Expected Loss Rate(ELr)=Probability of Default(PD)*Loss Given Default(LGD). PD is the most difficult to measure during each part of the Loan Pricing Model.This paper establishes a Bi-Logistic regression model to compute PD, conducting the empirical analysis using a sample of658individual customer loan data from a rural commercial bank of Jiangsu. Then, inputting the other relevant data into the model, getting a Model Interest Rate for each sample, the paper compares the Model Interest Rate with the Real Interest Rate. The analysis indicates that the pricing model proposed in this paper is scientific and practical applicable to some extent, provides a reference method for rural commercial banks to pricing the loans scientifically and rationally.But the measure of PD is still not entirely satisfactory. Moreover, this paper fails to establish a measurement model of PD for enterprise customers. In future research, this paper will focus on this area, so as to make the research results applied in banking practice.