The-definition.com

Definition

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:  Cite

More from this Section

  • Banker’s Acceptance
    Banker’s Acceptance is negotiable time drafts, or bills of exchange, that have been ...
  • Proximate cause
    Proximate cause is factor causing damage to property for which there is an unbroken chain ...
  • APEDA
    APEDA means Agricultural and Processed Food Products Exports Development Authority. ...
  • Credit Crunch
    Credit Crunch refers to a situation where supply of credit falls even though there is ...
  • Unsatisfied judgment fund
    Unsatisfied judgment fund established by a small number of states to compensate accident ...