This study investigates the dynamic relationship between a set of banking sector development indicators and interest rate volatility for 12 emerging market countries during the period of 1980-2019. For this purpose, the bounds testing within autoregressive distributed lag (ARDL) methodology is employed. The empirical results reveal that the interest rate volatility has negative impacts on the majority of the banking sector development indicators which also play a significant role in dampening the banking sector development path in the long-run. These findings suggest that the banking sectors of emerging countries are vulnerable to interest rate risks. Thus, the results have important implications for policymakers to improve the banking system and to promote economic growth of emerging economies.