DEFINITION of 'Net Borrowed Reserves'

A statistic released in weekly Federal Reserve data showing the difference between the amount of money a bank has borrowed from the Fed and the cash reserves the bank holds above the required minimum. Net borrowed reserves is expressed as a negative number. Deposit banks are required to keep a certain amount of cash on hand at all times. If these banks don't have enough cash, they will borrow it from a Federal Reserve bank.

BREAKING DOWN 'Net Borrowed Reserves'

Net borrowed reserves can indicate a tight credit environment relative to the demand for loans and rising interest rates.

Conversely, if there is an excess of reserves in the banking system, the statistic will show net free reserves, which will be expressed as a positive number.

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RELATED FAQS
  1. Why do commercial banks borrow from the Federal Reserve?

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  3. How are bank reserve requirements determined and how does this affect shareholders?

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  4. Who determines the reserve ratio?

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