The Missing Link in Bank Behavior: Deposit Interest Rate Setting Under a Dual-Benchmark Framework—A Literature Review

The efficacy of monetary policy depends on an accurate model of bank behavior, yet the existing literature has a significant blind spot: the central role of deposit interest rate setting. This paper argues that the deposit rate is the primary arena where banks’ strategic and asymmetric responses to policy signals are revealed. Motivated by the unique dual-benchmark system in Indonesia, where a prudential deposit insurance rate actively competes with the central bank’s policy rate, this study addresses a conceptual problem with global relevance, namely, how monetary policy transmission functions when confronted with conflicting policy signals. To investigate this gap, this paper employs a Systematic Literature Review (SLR), combined with bibliometric analysis. By synthesizing findings from 63 articles selected via the PRISMA protocol, this review first maps the intellectual structure of the field, confirming that while themes of monetary policy and bank behavior are mature, the crucial dimension of deposit rate setting, particularly within a dual-benchmark context, remains a ‘missing link’. The primary contribution of this study is, therefore, building a conceptual framework that recenters the deposit interest rate as the fundamental indicator for assessing asymmetric bank behavior and identifying policy distortions. The findings provide a structured foundation for future empirical research and offer critical insights for regulators on the implications for monetary policy transmission and financial system stability.