If a one-size-fit-all interest rate is charged to different types of enterprises, the loss of some risky loans would not be covered. If accumulated, even losses on a small scale could evolve into large amount of NPLs. In sum, the progress of interest rate reform will have a bearing on the source and disposal of NPLs.
2  BIS Review 46/2004  Market-based interest rate should not only be reflected in pricing of loan products and other assets, but also be extended to pricing of all kinds of services and deposits.