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 ?
The Bank would like to avoid discontinuation of the indices on short notice, which could occur if there were a further drop in the number of financial institutions eligible to provide cost of funds data.
If the rewards-based checking product is structured correctly, the cost of funds discount stays fairly stable as a percentage, meaning the total savings versus the alternative funding source dramatically increases as rates rise.
Banks use marginal cost of funds when there is sufficient liquidity available at that rate to fund a reasonable proportion of the asset portfolio.Aditya PuriMD and CEO, HDFC Bank
The group has also suggested that banks move towards a new system of computing the base rate on the basis of marginal cost of funds instead of the present system of using the weighted average cost of funds.
This is significant as it means that further lending will need to be financed through costlier deposits and hence increase cost of funds. This supports our view that net interest margins will continue to be under pressure in the short-term.
He added he could not rule out further reductions in home loans but it would depend on deposit rates and the cost of funds.
While other variables, such as the cost of equity, profit margins and the risks associated with lending will also have a bearing on the interest rates customers are charged, the cost of funds will be major factor.
He said: "Over the last year the cost of funds at which we need to borrow at to fund our mortgage commitments has risen considerably.
To examine and compare various elements of cost of funds and return on funds of various categories of banks.
As a further outcome of sluggish lending, Colby said "looking at cost of funds versus marginal investment return, if you had to put it overnight in a corporate, you're losing money." Based on first-quarter data, the yield on average loans was 6.13% or 480 basis points above cost of funds, he explained.
Reduction in cost of funds lead to an improvement in NIMs, said M V Nair, CMD, Union Bank of India.
Trichet said the ECB would index the cost of funds at its next - and final - 12-month liquidity operation on December 16 to its main policy rate, linking it to the average minimum cost of funds in its regular weekly loans to banks.