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    Question

    'Haircut' in the context of collateral valuation refers

    to: 
    A The fee charged for valuation. Correct Answer Incorrect Answer
    B The percentage reduction applied to the market value of an asset to account for volatility. Correct Answer Incorrect Answer
    C The tax deducted at source on interest. Correct Answer Incorrect Answer
    D The interest rate discount for good borrowers. Correct Answer Incorrect Answer
    E The process of selling the collateral. Correct Answer Incorrect Answer

    Solution

    If a house is worth ₹1 Crore and the bank applies a 20% haircut, they will only consider ₹80 Lakh for the purpose of lending.

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