Compensatory balance

Economic nouns

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Compensatory balance is Loan issuance The bank requires the borrowing enterprise to pay low or no interest loan Total amount or actual borrowing amount must percentage (generally 10% to 20%). Compensatory balance helps banks reduce Loan risk , to compensate for the risks it may suffer; For borrowing enterprises, the compensatory balance increases the Effective interest rate The interest paid by the enterprise remains unchanged, and the total amount of actual loans received decreases, increasing the financial burden of the enterprise.

Chinese name: Compensatory balance
Actual interest rate of loan: =Nominal interest rate/(1 - compensatory balance ratio

Impact: Increased the financial burden of enterprises
Role: Helps banks reduce loan risk

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Interest rate calculation

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Compensatory balance loan Effective interest rate = Nominal interest rate /(1 - Compensatory balance ratio)

Example 1

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Compensatory balance calculation formula

The enterprise borrows 10 million yuan with compensatory balance, Nominal interest rate 12%, and the compensatory balance ratio is 10%. Then the loan amount that can be used by the actual enterprise is 1000 × (1-10%)=9 million yuan,

Effective interest rate =Annual interest/actually available loan

= Nominal interest rate /(1 - Compensatory balance ratio)

=12%÷（1-10%）

=13.33%

Example 2

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An enterprise presses Annual interest rate 4.5% direction Bank borrowings 2 million yuan, the bank requires to retain 10% of the compensatory balance Effective interest rate How much?

Effective interest rate=4.5% ÷ (1-10%)=5%

Because the enterprise obtained from the bank Long term borrowings Interest can be paid at Pre tax deduction Helps enterprises reduce Tax burden Therefore, the effective interest rate of long-term borrowings (also known as actual cost Rate)= Nominal interest rate *（1- corporate income tax Tax rate)/(1-compensatory balance ratio), which is more reasonable.

In the above example, the effective interest rate=4.5% × (1-25%) ÷ (1-10%) × 100%=3.75%

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