Credit Crunch

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An economic condition where investment capital is hard to secure is referred to as a credit crunch. Investors and banks become wary of lending funds to corporations and individuals which drives up the price of debt products for borrowers. It is often an extension of a recession and a credit crunch makes it almost impossible for companies to borrow as lenders are scared about instances like bankruptcies or defaults which could lead to high rates.

It is also known as a credit squeeze or credit crisis and occurs independently of a sudden change in the rates of interest. Individuals and businesses that could earlier obtain loans to expand operations or to finance major purchases suddenly end up unable to acquire such funds. This effect can be felt throughout the entire economy because of a drop in homeownership rates and businesses being forced to cut back because of capital shortage.


The credit crunch is often followed by a period where lenders are too lenient in offering credit. Here, loans are offered to borrowers with questionable ability to repay the amount, resulting in default rate and rising of bad debt. 

About RCBS: One of the Best Business Schools in Kerala, RCBS welcomes you to grab your admission at Rajagiri Centre for business studies, the b schools in Kerala. RCBS also noted as one of the top MBA colleges in Kerala located in Kochi. Courses offered are MBA, MHRM and PGDM. Join to RCBS, One of the Top Business Schools in Kerala. 

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