Define cost of funds refers to the interest rate paid by financial institutions for the capital they borrow to lend to their customers. It is a critical component in determining the profitability of financial institutions and influences the interest rates they offer on loans and deposits. The prevailing interest rates set by central banks and financial markets directly impact the cost of funds. Lower interest rates generally reduce borrowing costs for financial institutions, while higher rates increase costs. Economic conditions, such as inflation rates, economic growth, and market liquidity, affect the cost of funds. For more info click here #costoffundsindex