BUISENESS MANAGEMENT
RISK MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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FDR
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NSC
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Stocks
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Immovable property
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Detailed explanation-1: -When a bank takes a ‘haircut’, it means it accepts less than what was due in a particular loan account. Example: if a bank was owed Rs 10, 000 by a borrower and it agrees to take back only Rs 8, 000, it takes a 20% haircut. Banks do this for accounts where chances of making a full recovery are bleak.
Detailed explanation-2: -A legal lending limit is the most a bank or thrift can lend to a single borrower. The legal limit for national banks is 15% of the bank’s capital. If the loan is secured by readily marketable securities, the limit is raised by 10%, bringing the total to 25%.
Detailed explanation-3: -A haircut is the lower-than-market value placed on an asset when it is being used as collateral for a loan. The size of the haircut is largely based on the risk of the underlying asset. Riskier assets receive larger haircuts.
Detailed explanation-4: -Maximum Credit Exposure means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s Loans and its Swingline Exposure at such time. “