Consider the following statements : Statement-I : Syndicated lending spreads the risk of borrower default across multiple lenders. Statement-II : The syndicated loan can be a fixed amount/lump sum of funds, but cannot be a credit line. Which one of the following is correct in respect of the above statements ?
A
Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
B
Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
C
Statement-I is correct, but Statement-II is incorrect
Correct Answer
D
Statement-I is incorrect, but Statement-II is correct
Explanation
Statement-I is correct because syndicated lending involves a group of lenders pooling funds for a single borrower, which naturally distributes the default risk among multiple institutions. Statement-II is incorrect because syndicated loans are versatile financial instruments that can be structured as either fixed-term loans or revolving credit lines. Options
Financial MarketsCorporate Finance & BankingSyndicated lendingBorrower defaultCredit lineMultiple lendersRisk distribution