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UPSC 2011: Why is the offering of "teaser loans" by commercial banks a cause of economic concern? 1. 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. 2. 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?
(a)1 only
(b)2 only
(c)Both 1 and 2
(d)Neither 1 nor 2
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Not attemptedCorrect Answer: (a) 1 only
Teaser loans start with artificially low interest rates and later reset to much higher rates, a pattern similar to U.S. sub-prime mortgages; hence statement 1 is correct. They are largely used for retail (especially housing) borrowers and not targeted at inexperienced entrepreneurs, so statement 2 is false. ([gktoday.in](https://www.gktoday.in/solution-of-the-upsc-prelims-2011-general-studies-paper/))
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Frequently Asked Questions
What is the correct answer to this UPSC 2011 Indian Economy question?▼
The correct answer is option (a): 1 only. Watch the detailed video explanation in our Sherlocking Prelims course on UnlockIAS.
Which year was this Banking & Financial Sector question asked in UPSC Prelims?▼
This question was asked in UPSC CSE Prelims 2011, GS Paper 1, as Question 80. It falls under Indian Economy > Banking & Financial Sector.
What is the difficulty level of this UPSC question?▼
This question is rated "moderate". It requires sound conceptual understanding of the topic.
How many UPSC Prelims questions have been asked from Banking & Financial Sector?▼
UPSC has asked 48 questions from Banking & Financial Sector (under Indian Economy) across multiple years. Visit the topic page to see the full list and year-wise trends.