compensating balance

Definitions of compensating balance
1

n 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

“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:
offsetting balance
Type of:
balance
the difference between the totals of the credit and debit sides of an account

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