What is the compensating balances?
Compensating balance is the bank require the borrower to remain the minimum deposit balance calculated by the lending limit or the actual amount of a certain percentage (usually 10% to 20%).
Compensating balances will help banks reduce credit risk, compensate the risks they may suffer,to borrower enterprises,compensating balances are real interest rates increase borrowing,also increase the interest burden of enterprises.
Posted: June 7th, 2010 under Breaking News.
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