Cost of funds


Also found in: Acronyms.

Cost of funds

Interest rate associated with borrowing money.

Cost of Funds

The amount of money paid in interest on a loan. The cost of funds is an expense for both personal and business loans. It also refers to the interest rate in addition to the absolute amount in interest.
References in periodicals archive ?
3%), but a month later a new borrower might get a loan at a lower MCLR if the cost of funds drops.
Banks use marginal cost of funds when there is sufficient liquidity available at that rate to fund a reasonable proportion of the asset portfolio.
The group has suggested that if banks continue to use the weighted average cost of funds because of their deposit profile or any other methodology that may result in differentiation between old and new customers, their boards should ensure that this differentiation does not lead to discrimination between borrowers.
Because of this type of rate fluctuation, it is important that credit unions take the long view when they forecast their future cost of funds.
An unusually steep and sustained decline in the cost of funds to issuers and the lingering effects of the last recession, which saw outstanding balances on credit cards grow at a much reduced pace, have exerted downward pressure on credit card interest rates.
The market alternative cost of funds is 8%, the savings account interest expense is 4% and the service expense is 2%, representing a cost advantage of 2% (8% - (4% + 2%)).
Our concerns stem from: (1) the mandatory substitution of an external interest rate in lieu of the taxpayer's specific cost of funds and (2) the likely exacerbation of the propensity of the proposed regulations to overcapitalize interest.
Such factors may include, but are not limited to, business and capital management plan adjustments and amendments, changes in the bank's management and Board of Directors, regulatory actions or approvals, competitive pressure from other Federal Home Loan Banks and alternative funding sources, accounting adjustments or requirements, interest-rate volatility, the bank's ability to maintain adequate capital levels, changes in projected business volumes, our ability to appropriately manage our cost of funds, changes in our membership profile or the withdrawal of one or more large members, the cost-effectiveness of our funding, hedging and asset-liability management activities, shifts in demand for our products and consolidated obligations, and general economic conditions.
New Delhi: The Reserve Bank of India (RBI) in its monetary policy announcement on Wednesday kept key interest rates at hold, but its observations on Marginal Cost of Funds based Lending Rates (MCLR) may bring cheers to Pre-April 2016 home loan borrowers.
Marginal cost of funds is the extra cost a bank bears any additional borrowing.
According to a finance department official, the corporation can afford to offer higher interest rates as cost of funds is much lower.
The Reserve Bank of India has prescribed a 12 percent margin cap (difference between cost of funds and lending rate).