How do you calculate your interest rates?

What is the formula by which banks calculate interest rates for large companies loans?

• Answer:

  Two way of calculation there depends upon the policy of bank Flat rate and reducing balance, (Large companies loans mostly calculating on reducing balance) Examples Take a loan of 100000 for 5 years Interest rate is 10% in Flat rate Total amount to be pay back will be 100000 + 10% x 5 = 150000 in reducing balance we take loan of 100000 and first month our outstanding will be 100000+10% = 100833 suppose we paid first installment 10000 so balance amount of 100833-10000=90,833 + 10% per month will be charged for next month if you are willing for pay fixed amount, the go for flat rate and if you expect pay back high amounts in future, go for reducing balance rate. Best of luck Sorry , I don't understand what you want to know exactly? Interest rates are mostly decided by Reserve bank of India That rates are changing according to too many parameters, Per capita Income, Inflation of money, Loan established etc.