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?
Why UPSC dropped it · explanation
UPSC dropped this question from evaluation in its final answer key.
UPSC dropped this question from evaluation in its final answer key. On the facts, a syndicated loan is one loan made by a group of lenders to a single borrower, so each lender carries only part of the default risk and Statement-I holds. Syndicated loans come both as fixed-amount term loans and as credit lines, so Statement-II is wrong.
- ✓ Statement-I In a syndicate, a group of financial institutions funds parts of one loan, so the risk of the borrower defaulting is shared among them. The BIS says the syndicated loan market allows a more efficient geographical and institutional sharing of risk.
- ✗ Statement-II A syndicated loan need not be a lump sum. BIS data on syndicated loans show credit lines and term loans both in large numbers: credit lines are 50% of bank loans and 41% of non-bank loans, term loans 40% and 48%.
Remember · A syndicated loan is one loan from several lenders to one borrower, which spreads the risk. It can be a fixed-amount term loan or a credit line.
Sources
- BIS Quarterly Review, December 2004: The syndicated loan market: structure, development and implications ↗ “The syndicated loan market allows a more efficient geographical and institutional sharing of risk.”
- BIS Quarterly Review, March 2022: Non-bank lenders in the syndicated loan market ↗ “Credit lines comprise 41% and term loans 48% of all non-bank loans, compared with 50% and 40% for banks. … A syndicated loan is granted by a group of financial institutions (the "syndicate") to a single borrower.”
Question and answer: UPSC's official GS Paper I (2024, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). ·