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

  • Bank failure
    Bank failure is a situation in which a bank cannot satisfy its obligations to pay its depositors and other creditors and so goes out of business.
  • Endowment
    Endowment refers life insurance that combines the characteristics of savings and insurance: the policyholder collects a stated sum if he or she is living when the policy matures. The beneficiary receives the amount the endowment was intended to accumulate (the face value) if the policyholder dies before the policy is fully paid.
  • Allied member
    Allied member is a partner or stockholder of a firm that is a member of the NYSE, the partner or stockholder is not
  • Amortization
    Amortization means the allocation of the cost of an intangible asset to expense over its useful life in a systematic and rational manner.
  • Foreign Exchange
    Foreign Exchange is the system or process of converting one national currency into another and of transferring money from one country to
  • Translation exposure
    Translation exposure— degree to which a firm’s consolidated financial statements are exposed to fluctuations in exchange rates.
  • Repurchase agreement (RP)
    Repurchase agreement (RP) is a money market instrument that involves the temporary sale of high-quality assets (usually