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TERM LOANS QUES
What is the primary purpose of a term loan in banking?
A term loan is extended to finance capital expenditure or long-term investment needs of borrowers, repayable over a defined period exceeding one year.
What is the minimum Debt Service Coverage Ratio (DSCR) generally acceptable for term loan sanction?
Minimum acceptable DSCR is 1.25 to 1.50 times.
How is the repayment period of a term loan typically classified?
Term loans are classified as short-term (up to 3 years), medium-term (3–7 years), and long-term (above 7 years), depending on the nature of the asset financed.
What is the difference between short-term and long-term term loans based on tenure?
Short-term is up to 3 years; long-term exceeds 3 years.
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