Q32. 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 ?
Detailed Solution
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.
Current Affairs Link
Recent syndicated loan facilities by Indian banks and NBFCs (e.g., SBI, Shriram Finance) have been reported in financial news.
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