The
Definition Of

Problem loan

Problem loan or classified loan refers those loans that have pushed the bank’s financial position at stake usually due to the fact that, the borrower has missed one or more scheduled loan payments or the collateral behind the loan agreement has significantly declined in market value overtime. As we know, in granting loan each bank follws a specified a loan policy set out by the top officials in the bank. The loan applications are reviewed and the loan committee in the loan department tries to find out whether the loan application match the standard set the by bank for granting loan in terms of financial viability, maturity, types of loan applied for, nature of collateral promised to be pledged etc. after sanctioning loan bank’s credit department tries to establish a super visionary activity for the loan disbursed. Despite all of these safeguards most bank end up with situation where some of its loan granted becomes problem or distressed loan.

Share it:

More from this Section

  • Current Accounts
    A Current Account at a bank is the account by which a customer (most of businessman) is able to maintain a higher number of...
  • Call Provision
    Call Provision is a feature of a bond that entitles the issuer to retire the bond before maturity
  • Default Risk Premium
    Default Risk Premium is the component of a required interest rate that is based on the lenders’ perceived risk of default.
  • Exchange Rate Risk
    Exchange Rate Risk is the risk that changes in currency exchange rates may have an unfavourable impact on costs or revenues of economic
  • Capital investments
    Capital investments are money used to purchase permanent fixed assets for a business, such as machinery, land or buildings as opposed to day-
  • Bid/Ask Spread of Banks
    Commercial banks charge fees for conducting foreign exchange transaction. At any given point in time, a bank’s bid (buy) quote for a foreign currency will be less than its ask (sell) quote.
  • Hague Rules
    Hague Rules is anternational Convention for the Unification of Certain Rules relating to Bills of Lading – Brussels Convention of 1924 – a set