C TERM LOAN
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Advanced Bank Management — CAIIB.
One-liners from this chapter
Free sample — 8 of 66 rapid-fire Q&A cards.
What is a term loan in the context of bank credit?
A term loan is a credit facility sanctioned for a specific period, typically exceeding one year, for financing capital expenditure such as purchase of machinery, equipment, or construction of fixed assets.
What is the typical maximum repayment period for a long-term loan sanctioned by banks?
Long-term loans are repaid over periods exceeding seven years.
How are term loans classified based on their tenure?
Term loans are classified as short-term (up to 1 year), medium-term (1–5 years), and long-term (above 5 years) based on the repayment period.
What is a medium-term loan and what tenure does it generally cover?
Medium-term loans have repayment tenures ranging from three to seven years.
What is the primary purpose for which term loans are sanctioned by banks?
Term loans are sanctioned primarily to finance fixed assets, capital expenditure, project financing, and infrastructure development rather than working capital needs.
What financial ratio is used to assess whether a project can service its debt obligations?
Debt Service Coverage Ratio (DSCR) is used to assess debt servicing capacity.
What does DSCR stand for and why is it critical in term loan appraisal?
DSCR stands for Debt Service Coverage Ratio; it measures a borrower's ability to service debt (principal + interest) from net cash accruals and is a key indicator of repayment capacity in term loan appraisal.
What does 'gestation period' mean in the context of a project financed by a term loan?
Gestation period is the time from loan disbursement until the project generates revenue.
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