36. What is the purpose of loan loss reserves in lending risk management?
a) To calculate the loan amount for borrowers
b) To recover funds from non-performing assets
c) To set aside funds to cover potential loan losses
d) To determine the interest rate on loans
37. Which of the following is a common consequence of high non-performing assets?
a) Increased profitability for the bank
b) Attracting more borrowers
c) Reduced capital adequacy for the bank
d) Decreased credit risk for the bank
38. What is the purpose of loan covenants in lending?
a) To determine the borrower’s creditworthiness
b) To increase the loan approval rate
c) To establish the terms and conditions of the loan
d) To calculate the loan amount
39. How does borrower capacity impact credit risk in lending?
a) A higher borrower capacity reduces credit risk
b) A higher borrower capacity increases credit risk
c) Borrower capacity has no impact on credit risk
d) Borrower capacity only affects the interest rate
40. What is the purpose of a loan committee in lending?
a) To determine the interest rate on loans
b) To identify non-performing assets
c) To assess the borrower’s creditworthiness
d) To evaluate the bank’s capital adequacy
