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'Sub-prime' refers to
- a)Lending done by banks at rates below PLR
- b)Funds raised by banks at sub-libor rates
- c)Group of banks which is not rated as prime bank as per Banker's Almanac
- d)Lending done by financing institutions including banks to customers not meeting with normally required credit appraisal standards
- e)None of these
Correct answer is option 'D'. Can you explain this answer?
Most Upvoted Answer
Sub-prime refers toa)Lending done by banks at rates below PLRb)Funds r...
Sub-prime refers to lending done by financing institutions, including banks, to customers who do not meet the normally required credit appraisal standards. These customers are considered to have a higher risk of defaulting on their loans.
Explanation:
Sub-prime lending refers to the practice of providing loans to individuals or businesses with low creditworthiness. These borrowers often have a history of late payments, high levels of debt, or a poor credit score. As a result, they are considered to be at a higher risk of defaulting on their loan payments.
Lending institutions, including banks, may engage in sub-prime lending as a way to expand their customer base and generate higher interest income. However, these loans carry a higher level of risk, and therefore, the interest rates charged on sub-prime loans are typically higher than those offered to borrowers with better credit histories.
Sub-prime lending became particularly prominent in the early 2000s leading up to the global financial crisis. During this time, there was a significant increase in the issuance of sub-prime mortgages, which were home loans given to borrowers with poor credit. These sub-prime mortgages were often bundled together and sold as mortgage-backed securities to investors.
The collapse of the sub-prime mortgage market in the United States in 2007-2008 triggered a global financial crisis, as the default rates on these loans surged. Many financial institutions that had invested in sub-prime mortgages suffered significant losses, leading to a widespread credit crunch and a sharp decline in economic activity.
In conclusion, sub-prime lending refers to the practice of providing loans to borrowers with low creditworthiness. This type of lending carries a higher risk of default, and it played a significant role in the global financial crisis.
Explanation:
Sub-prime lending refers to the practice of providing loans to individuals or businesses with low creditworthiness. These borrowers often have a history of late payments, high levels of debt, or a poor credit score. As a result, they are considered to be at a higher risk of defaulting on their loan payments.
Lending institutions, including banks, may engage in sub-prime lending as a way to expand their customer base and generate higher interest income. However, these loans carry a higher level of risk, and therefore, the interest rates charged on sub-prime loans are typically higher than those offered to borrowers with better credit histories.
Sub-prime lending became particularly prominent in the early 2000s leading up to the global financial crisis. During this time, there was a significant increase in the issuance of sub-prime mortgages, which were home loans given to borrowers with poor credit. These sub-prime mortgages were often bundled together and sold as mortgage-backed securities to investors.
The collapse of the sub-prime mortgage market in the United States in 2007-2008 triggered a global financial crisis, as the default rates on these loans surged. Many financial institutions that had invested in sub-prime mortgages suffered significant losses, leading to a widespread credit crunch and a sharp decline in economic activity.
In conclusion, sub-prime lending refers to the practice of providing loans to borrowers with low creditworthiness. This type of lending carries a higher risk of default, and it played a significant role in the global financial crisis.
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Sub-prime refers toa)Lending done by banks at rates below PLRb)Funds r...
'Sub-prime' refers to lending done by financing institutions including banks to customers not meeting with normally required credit appraisal standards. In this type of lending, loans are given to people who may have difficulty maintaining the repayment schedule, sometimes reflecting setbacks, such as unemployment, divorce, medical emergencies, etc. These loans are characterized by higher interest rates, poor quality collateral, and less favorable terms in order to compensate for higher credit risk.
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Sub-prime refers toa)Lending done by banks at rates below PLRb)Funds raised by banks at sub-libor ratesc)Group of banks which is not rated as prime bank as per Bankers Almanacd)Lending done by financing institutions including banks to customers not meeting with normally required credit appraisal standardse)None of theseCorrect answer is option 'D'. Can you explain this answer? for Banking Exams 2025 is part of Banking Exams preparation. The Question and answers have been prepared according to the Banking Exams exam syllabus. Information about Sub-prime refers toa)Lending done by banks at rates below PLRb)Funds raised by banks at sub-libor ratesc)Group of banks which is not rated as prime bank as per Bankers Almanacd)Lending done by financing institutions including banks to customers not meeting with normally required credit appraisal standardse)None of theseCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for Banking Exams 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Sub-prime refers toa)Lending done by banks at rates below PLRb)Funds raised by banks at sub-libor ratesc)Group of banks which is not rated as prime bank as per Bankers Almanacd)Lending done by financing institutions including banks to customers not meeting with normally required credit appraisal standardse)None of theseCorrect answer is option 'D'. Can you explain this answer?.
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