New All India SEBI Grade A Scholarship Test on June 11, 2023
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Question

XYZ Bank Ltd specializes in granting loans to firms in a specific line of business. Which of the following is true in this case?

A Bank would decrease its operating cost and decrease its credit risk Correct Answer Incorrect Answer
B Bank would increase both its operating cost and its credit risk Correct Answer Incorrect Answer
C Bank would increase its operating cost and decrease its credit risk Correct Answer Incorrect Answer
D Bank would decrease its operating costs and increase its credit risk Correct Answer Incorrect Answer
E none of the above Correct Answer Incorrect Answer

Solution

Specialisation can reduce operating cost due to economies of scale. However credit risk may increase due to concentration risk.

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