Solution

High LTV ratio means high loan as compared to the value of the asset financed. In such a case the collateral value is insufficient or offers very little margin of safety for the bank in case of default by the borrower Weak credit policy can lead to poor credit appraisal and inadequate follow-ups leading to higher risk of default Higher exposure to single territory increase the geographical risk like the one witnessed by Microfinance institutions when all MFI loans in Andhra Pradesh turned bad and MFIs concentrated in that state suffered huge non-recoveries. Crystallisation of contingent liabilities poses liquidity risk to the banks.