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    Question

    Which of the following is not an external factor leading to credit risk?                    

    A Ban on exports Correct Answer Incorrect Answer
    B Trade Sanctions Correct Answer Incorrect Answer
    C Increase in GST tax rates Correct Answer Incorrect Answer
    D Excess exposure to single geographical area Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    External factors to credit risk •       State of Economy •       Wide swings in commodity prices •       Trade restrictions •       Economic sanctions •       Government policies                                            Internal factors to credit risk •       Weak credit policy and administration of loan portfolio •       Absence of prudential credit concentration limits •       Lapses in assessing the credit profile of borrower •       Inadequate risk pricing •       Insufficient collateral value or excessive dependence on collaterals •       Failure in post-sanction follow-ups

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