This is typically rationalized by arguing that lenders’ liability maturity-profile is short-term and, therefore, it is only prudent that lenders make either short-term loans, or long-term loans, which involve frequently resetting interest rates depending upon the evolving market interest rates.
While prima facie this rationalization may seem unexceptionable from the point of view of lenders, on a more incisive analysis, it turns out that, in the medium to long term, it is neither in the interests of borrowers, nor lenders.