BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Banks have different interest rate for different loan products. To which rate are there interest rates linked?
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Prime lending rates
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Base rate
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RBI administered rates
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The bank rate
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Explanation:
Detailed explanation-1: -The loan duration, or how long to maturity, is also important. With a longer duration comes a higher risk that the loan will not be repaid. This is generally why long-term rates are higher than short-term ones. Banks also look at the overall capacity for customers to take on debt.
Detailed explanation-2: -Banks often use compound interest to calculate bank rates. In essence, compound rates are calculated on the two key components of a loan-principal and interest. With compound interest, the loan interest is calculated on an annual basis.
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