Banking Awareness - Banking Acts, Reforms & Risk Management
A bank suffers losses because a major borrower defaults on loan repayment. This situation represents which type of banking risk?
A bank suffers losses because a major borrower defaults on loan repayment. This situation represents which type of banking risk?
easy Q1 of 15
Step-by-Step Solution
Step 1: Identify the source of loss
The loss arises due to a borrower failing to repay a loan.Step 2: Match with risk category
Borrower default directly creates credit risk for banks.Final Answer:
Credit risk → Option AQuick Check:
Loan default by borrower = Credit risk ✅
Quick Trick: Borrower failure always indicates credit risk.
Common Mistakes:
MISTAKES- Confusing borrower default with liquidity problems.
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