Consider the following statements:
Statement-I: Syndicated lending spreads the risk of borrower default across multiple lenders.
Statement-II: The syndicated loan can be a fixed amount/lump sum of funds, but cannot be a credit line.
Which one of the following is correct in respect of the above statements?
A.Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
B.Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
C.Statement-I is correct, but Statement-II is incorrect✓ Correct
D.Statement-I is incorrect, but Statement-II is correct
Explanation
A syndicated loan is a loan offered by a group (syndicate) of lenders to a single borrower. Because the loan is shared among multiple banks/financial institutions, the risk of borrower default is also distributed proportionately among them — so Statement-I is correct. Syndicated loans can be structured either as a term loan (fixed lump sum) OR as a revolving credit line / revolving credit facility — they are commonly used for both. Hence Statement-II is incorrect. Therefore Statement-I is correct but Statement-II is incorrect.
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