COMPENSATING BALANCE

Pronunciation (US):

(GB):

IPA (US):

 Dictionary entry overview: What does compensating balance mean? 

• COMPENSATING BALANCE (noun)
  The noun COMPENSATING BALANCE has 1 sense:

1. 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

  Familiarity information: COMPENSATING BALANCE used as a noun is very rare.

 Dictionary entry details 

• COMPENSATING BALANCE (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

Classified under:

Nouns denoting possession and transfer of possession

Synonyms:

compensating balance; offsetting balance

Context 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

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

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