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    compensating balance

    compensating balance - Dictionary definition and meaning for word compensating balance

    Definition
    (noun) 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
    Synonyms : offsetting balance
    Example Sentence
    • the compensating balance increases the effective interest rate to the bank since the net amount loaned is reduced but the interest paid is unchanged

Word used in video below:
text: so how does this work gonna balance the
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