UPSC CSE Prelims
Question 47
Why is the offering of "teaser loans" by commercial banks a cause of economic concern ?
- The teaser loans are considered to be an aspect of sub-prime lending and banks may be exposed to the risk of defaulters in future.
- In India, the teaser loans are mostly given to inexperienced entrepreneurs to set up manufacturing or export units.
Which of the statements given above is/are correct ?
View correct answer and explanation
Correct answer: A
Correct Option: A
Explanation: Teaser loans start at a low promotional interest rate that later rises, potentially creating repayment stress and default risk for borrowers.
Statement / Item-wise Analysis:
1: Correct - Correct: interest-reset risks can leave lenders exposed to overextended borrowers.
2: Incorrect - Incorrect: the term normally referred especially to housing loans, not mainly lending to new exporters or manufacturers.
Option-wise Analysis:
A: Correct - includes the supported statements and excludes the unsupported ones.
B: Incorrect - includes unsupported item 2; omits supported item 1.
C: Incorrect - includes unsupported item 2.
D: Incorrect - omits supported item 1.