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 ?

1. A. Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
2. B. Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
3. C. Statement-I is correct, but Statement-II is incorrect
4. D. Statement-I is incorrect, but Statement-II is correct

Answer: C

Explanation

Statement-I is correct. Syndicated lending involves a group of lenders pooling resources to provide a large loan to a single borrower. This mechanism inherently spreads the risk of borrower default across multiple financial institutions, making it attractive for large-scale projects. Statement-II is incorrect. A syndicated loan can be structured in various ways, including as a fixed-amount term loan, a revolving credit facility (credit line), or a combination of both, offering flexibility to meet the borrower’s needs. Therefore, Statement-I is correct, but Statement-II is incorrect. This question tests knowledge of financial instruments and banking practices, often relevant in current economic news.