The study looked at how banks in Sri Lanka decide on interest rates for loans and deposits. They found that banks consider factors like credit quality, efficiency, and excess money in the system when setting rates. Banks with more bad loans tend to charge higher interest rates to make up for losses. Inefficient banks offer lower deposit rates to customers. Surprisingly, banks with operational inefficiencies tend to have lower lending rates. Overall, the study shows that banks in Sri Lanka look at their own financial health, along with government policy, when deciding on interest rates.