Credit Delivery Part 2 Ques
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 65 rapid-fire Q&A cards.
What is the primary purpose of a term loan in the context of credit delivery?
A term loan is extended for acquisition of fixed assets such as land, machinery, or buildings, repayable over a defined period usually exceeding one year through scheduled instalments.
What is a 'Line of Credit' and how does it function as a credit delivery tool?
Pre-approved borrowing limit drawn as needed by borrower
What does the concept of 'fungibility of funds' imply in credit management?
Fungibility of funds means that once credit is disbursed, it becomes indistinguishable from the borrower's own funds, making end-use monitoring essential to ensure funds are used for the sanctioned purpose.
What is the difference between 'Fund-Based' and 'Non-Fund-Based' limits in bank credit?
Fund-based involves actual disbursement; non-fund-based is contingent liability
What is a Consortium Lending arrangement in bank credit?
Consortium lending is an arrangement where multiple banks jointly finance a single borrower under a common appraisal and documentation framework, with one bank acting as the lead bank to coordinate the credit.
What is 'Cash Credit' as a mode of working capital credit delivery?
Revolving facility secured by inventory and debtors with drawing power
Under RBI guidelines, what is the threshold for mandatory consortium or multiple banking arrangements?
RBI has deregulated consortium lending; however, banks must form a Joint Lenders' Forum (JLF) for accounts with aggregate exposure of Rs. 100 crore and above when stress is detected.
What is the purpose of a 'Letter of Comfort' in credit arrangements?
Moral assurance from parent company supporting subsidiary's borrowing
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