New RBI Grade B Notification Out - 94 Vacancies - Prepare with Us!

    Register

    Question

    What is limited recourse financing?

    A A type of financing where the lender can only recover its loan from a specific source, such as project cash flows Correct Answer Incorrect Answer
    B A type of financing where the borrower is personally liable for the entire loan amount Correct Answer Incorrect Answer
    C A type of financing where the lender has the right to seize any assets of the borrower in case of default Correct Answer Incorrect Answer
    D A type of financing where the borrower can use the loan for any purpose, without any restrictions Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    Limited recourse financing is a type of financing where the lender's ability to recover its loan is limited to a specific source of repayment, such as project cash flows or specific assets. This means that the lender has limited recourse to the borrower's other assets in the event of default, which helps to reduce the lender's overall risk exposure. Limited recourse financing is commonly used in project finance, where lenders are primarily interested in the project's ability to generate sufficient cash flows to repay the loan.

    Practice Next

    Relevant for Exams: