WHY BANK OFFER NEGATIVE RATE OF INTEREST?

WHY BANK OFFER NEGATIVE RATE OF INTEREST?

Denmark Third Largest Lender- Jyske Bank , is offering negative rate of interest on 10 year Home Loan. This is not the only bank which offer negative rate of Interest. In the world, there are many countries offering negative rate of interest like- Japan, Switzerland, Sweden, Denmark.

What is Negative Rate Of Interest?

A Negative Interest Rate Policy (NIRP) is a monetary policy tool through which the central bank sets nominal interest rates below the zero.

Example:

When we take a Loan from the bank then we repay it with Rate of interest but when the rate of interest is negative, the bank should be paying the borrower.

Why rate of Interest Negative?

Interest rates in a few countries in Europe, Japan, Sweden and Denmark, have been negative . This basically means that these countries are sloshing with money and the money is  not in demand. The economies have been slow down big time in the aftermath of the financial crisis  in 2008 and even 11 years later, aren’t growing much. Hence, banks by offering a negative rate of interest on their deposits.

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