Lecture-14 on Credit

Question: What is Loan Syndication ?

Answer:

Two or more banks contract with a borrower to provide long term loan on common terms & conditions governed by a common document.

 

Question. What are the Participants in Loan Syndication ?

Answer:

01.  Lead Arranger: Responsible for placing the syndicated loan with other banks & ensuring that the syndication is fully subscribed.

02.  Agent: Take care of the administrative arrangement, i.e., repayment, compliance etc.

03.  Participating Bank: Those banks who participates to give the principle amount

04.  Underwriting Bank: Commits to supplying the funds to the borrower, underwriter & agent takes fees for their performance.

 

Question: What is Securitization ?

Answer.

Setting aside a group of income earning assets & issuing securities against them in order to raise new funds.

 

Question: What is Leasing?

Answer:

Leasing is a contract between two parties lessor & lessee that conveys the right of possession & use of specific assets to the lessee for a specific span of time & in return the lessee pays predetermined rentals to the lessor.

 

Question: What is Difference between financial leasing & operating leasing ?

Answer:

Financial Leasing

Ø    Lessor transfer all kinds of risks & rewards incident to the lessee

Ø    Lease is not cancelable prior to the expiry date.

Ø    Title may or may not be eventually transferred.

 

Operating Leasing

Ø    Lessor provides maintenance, repair & technical advice

Ø     Lease is cancelable prior to the expiry date.

Question: What is Sale and Lease Back?

Answer:

Sale of an existing assets to a financial institution and then leases it back to the user

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