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Question

Which of the following statements is true about the term 'Roll over' related to Economy, seen sometimes in news? 

A It is the practice of publishing new credit schemes by public sector banks wherein existing customers can transfer their old credit schemes Correct Answer Incorrect Answer
B It is the practice of refinancing of Debt with payment of additional fee Correct Answer Incorrect Answer
C Generally, Shorter the term of maturity of debt, less is the rollover risk associated with it. Correct Answer Incorrect Answer
D It is generally used as a measure by borrower to prevent situations of Debt Trap Correct Answer Incorrect Answer

Solution

● The term “Rollover” refers to the practice of “rolling over” a loan, wherein the borrower pays the lender an additional fee in order to extend the loan due date. ● Option D is Incorrect: This additional fee increases the cost of borrowing, and can lead some borrowers to become trapped in a cycle of debt, also known as a “debt trap" Rollover risk is a risk associated with the refinancing of debt. Rollover risk is commonly faced by countries and companies when a loan or other debt obligation (like a bond) is about to mature and needs to be converted, or rolled over, into new debt. ● Option C is Incorrect: Generally, the shorterterm the maturing debt, the greater the borrower's rollover risk

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