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Wilful Default Criteria Quiz

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Questions and Answers

What does the term 'diversion of funds' refer to in the context of wilful default?

The borrower uses the funds for legitimate business expenses.

The borrower fails to withdraw the secured amount.

The borrower pays off other debts with the loan funds.

The borrower invests loan money in personal ventures. (correct)

Which behavior qualifies a borrower as a 'wilful defaulter'?

They are facing temporary financial difficulties.

They forget to make a payment.

They have the ability to pay but choose not to. (correct)

They apply for a loan extension.

What constitutes 'disposal of assets' in the context of a borrower being deemed a 'wilful defaulter'?

Selling assets to cover loan payments without notification. (correct)

Temporary renting of assets used for collateral.

Transferring ownership of assets to relatives.

Making a trade of the assets to settle other debts.

Which action indicates 'siphoning off funds' by a borrower?

<p>Withdrawing loan amounts for personal uses.</p> Signup and view all the answers

All of the following behaviors can classify a borrower as a 'wilful defaulter' EXCEPT:

<p>Experiencing a temporary decline in income.</p> Signup and view all the answers

Study Notes

Criteria for Wilful Default

Definition: A "wilful defaulter" is a borrower who fails to meet payment obligations while demonstrating specific behaviors.
Capacity to Pay: Indicates that the borrower has the financial means to repay but intentionally decides not to fulfill these obligations.
Diversion of Funds: Occurs when the borrower misuses or redirects funds acquired through a credit facility away from their intended purpose.
Siphoning Off Funds: Involves the borrower extracting or withdrawing funds received through a credit facility for personal use rather than repayment.
Disposal of Assets: The borrower may sell or transfer ownership of movable or immovable assets linked to the credit facility without informing the lender.

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Description

Test your knowledge on the criteria for identifying a wilful defaulter in lending scenarios. This quiz explores the behaviors indicating that a borrower with the capacity to pay may choose not to fulfill their obligations. Understand the nuances of fund diversion and siphoning in the context of credit facilities.