Syndicated Lending
Question
Consider the following statements: Statement-I: Syndicated lending spreads the risk of borrower default across multiple lenders. Statement-II: The syndicated loan can be a fixed amount/lump sum of funds, but cannot be a credit line. Which one of the following is correct in respect of the above statements?
Options
Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
Statement-I is correct, but Statement-II is incorrect
Statement-I is incorrect, but Statement-II is correct
Explanation
Statement-I is correct; a syndicated loan involves a group of lenders pooling resources to fund a single borrower, fundamentally spreading the credit risk. Statement-II is incorrect; syndicated loans are highly flexible and frequently structured as a revolving credit line, not just as a fixed term loan.
Answer: (c).
Question details
Year
2024
Paper
GS Paper 1
Question
Q52
Subject
Economy
Sub-topic
Banking & RBI
Type
Assertion-Reason
Difficulty
Hard
Nature
Static
Source hint
RBI Consortium Lending Rules / Corporate Credit Syndication Framework
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