GK Question- 72
A new term “Predatory Lending” was making news recently in context with the Global Financial Crisis. In this context consider the following statements:
1. It refers to financing of High Net worth Individuals without proper security
2. The loans are usually at exorbitant interest rates
Which among the above statements is/ are correct?
[C]Both 1 & 2
[D]Neither 1 nor 2
Explanation: Predatory lending refers to financing of the low-income homeowners or other groups of individuals who are financially vulnerable. There are Usurious or excessive rates of interest. Predatory Lending is enticing borrowers to enter into “unsafe” or “unsound” secured loans for inappropriate purposes, generally advertised at a very low interest rate but then swapped with huge interest rates. The term was also related to the Credit card loans in India. In 2008, Reserve Bank of India (RBI) had set up an internal committee to frame guidelines on predatory lending and is exploring the possibility of extending the Usurious Lending Act to banks. In India, the Usurious Lending Act is applicable to the unorganized sector, including moneylenders and others.