Module: | Capital Adequacy, Basel Norms & Monetary Policy
Q32: Which of the following statements regarding "Fixed Rate Loans" are correct?
1. A "Fixed rate loan" is defined as a loan on which the interest rate is fixed for the entire tenor of the loan.
2. If the interest rate does not remain fixed for the entire tenor, the loan is defined as a "Floating rate loan".
3. Interest rates on fixed rate loans with a tenor below 3 years, must not be less than the benchmark rate for a similar tenor.
4. Fixed rate loans are prohibited for any tenor exceeding 10 years.
2. If the interest rate does not remain fixed for the entire tenor, the loan is defined as a "Floating rate loan".
3. Interest rates on fixed rate loans with a tenor below 3 years, must not be less than the benchmark rate for a similar tenor.
4. Fixed rate loans are prohibited for any tenor exceeding 10 years.
✅ Correct Answer: B
A "Fixed rate loan" is strictly defined as a loan where the interest rate is fixed for the *entire* tenor; otherwise, it is a floating rate loan.
Additionally, the Directions stipulate that interest rates on fixed rate loans with a tenor below 3 years shall not be less than the benchmark rate for a similar tenor.
There is no prohibition on fixed rate loans exceeding 10 years.
Additionally, the Directions stipulate that interest rates on fixed rate loans with a tenor below 3 years shall not be less than the benchmark rate for a similar tenor.
There is no prohibition on fixed rate loans exceeding 10 years.