compensating balance

1. 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

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

   Synonymsoffsetting balance

   Broaderbalance

Questions about compensating balance

What does compensating balance mean?

compensating balance means "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".

What is another word for compensating balance?

Close synonyms include offsetting balance. Each sense on this page lists its own synonyms, because a word with several meanings rarely has one substitute that works for all of them.