COMPENSATING BALANCE

Pronunciation (US):

(GB):

 I. (noun) 

Sense 1

Meaning:

A minimum credit balance that a bank may require a borrower to keep on deposit as a condition for granting a loan; a common requirement for establishing a line of credit at a bank

Example:

the compensating balance increases the effective interest rate to the bank since the net amount loaned is reduced but the interest paid is unchanged

Synonyms:

compensating balance; offsetting balance

Classified under:

Nouns denoting possession and transfer of possession

Hypernyms ("compensating balance" is a kind of...):

balance (the difference between the totals of the credit and debit sides of an account)

Credits