An overnight rate is the lowest available interest rate that a Central bank, commercial bank or institutions charge to lend money to another bank or institution overnight. During the day a bank may experience large volumes of lending and withdrawal activities which creates a shortage of surplus money at the end of the day, in order to increase their surplus they then borrow from banks with a large surplus.
What is an Overnight Rate?
An overnight rate is the lowest interest rate that a Central bank or commercial bank charges to lend money to another bank.
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