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Term: Accounting -> Compensating balance
Term:

Compensating balance

Definition:

An offsetting balance. A requirement by some banks that a borrower maintain a minimum balance in a checking or savings account as a condition of granting a loan. The offsetting balance increases the effective interest rate to the bank since the net amount loaned is reduced but the interest paid is unchanged.

Related terms:

Capial infusion

Joint payee endorsement
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