In the context of bank reserve management, how does the interest paid on required reserves affect interbank lending practices?

In bank reserve management, the interest paid on required reserves is important because it influences how banks choose to lend money to each other. When banks have to keep a certain amount of money as reserves, the interest they earn on this amount can make it more attractive for them to hold onto those reserves rather than lending them out. For example, if a bank earns a high interest rate on its reserves, it might prefer to keep its money parked there instead of lending it to another bank at a lower rate. This can lead to less interbank lending, as banks are incentivized to maintain their reserves to earn interest. Overall, the interest on required reserves can shape how much money flows between banks and affect the overall lending environment in the economy.