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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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