A compensating balance is the required minimum cash balance on deposit when money is borrowed from the bank.

Name: A compensating balance is the required minimum cash balance on deposit when money is borrowed from the bank.
Brand: Quizplus
Rating: 4.8 (54 reviews)

Question

Quizplus · Accepted Answer

A compensating balance is a requirement from the bank that the borrower maintain a minimum balance in their account as a condition for granting the loan. This minimum balance cannot be used or withdrawn and serves as collateral for the loan.

A Compensating Balance Is the Required Minimum Cash Balance on Deposit