Transaction cost of banks: a comparative study
Date
1988-10
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Abstract
The study of transaction cost in the financial markets is vital. Transaction cost as a measure of friction in the financial sector affects the delivery financial goods and thus, with money as a medium representing claims on real resources, affect the flow and composition of wealth in an economy.
Transaction cost in the rural financial markets has contributed a large share to the overall cost of credit to the rural areas. Recently, the concern of minimizing the cost of intermediation by banks is dictated by the necessity to ensure a generous flow of credit to this funds-deficient sector.
The composition and magnitude of transaction cost vary among the different types of banks. Branches of commercial banks and private development banks have the bulk of their transaction cost in funds-mobilization activities while rural banks' transaction cost is accounted mainly by their lending operations.