What is liquidity crunch

Dear Student

Liquidity crunch refers to the period when cash resources are in limited supply and demand for those resources is large, as a result high rate of interest is charged on the loans from businesses and individuals and much difficulty is faced by them in obtaining loans.
It can also be referred as liquidity crisis or credit crunch.
It can be caused due to mismatch of matured security between banks and businesses resulting in low availability of liquid resources.


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