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JAIBP Lending, Products, Operations & Risks Management Flashcards
51 question-and-answer cards covering Lending, Products, Operations & Risks Management as it is examined in JAIBP. 24 of them are printed below, taken from across the deck — no signup, no paywall on the preview.
24 sample cards from the Lending, Products, Operations & Risks Management deck
Sampled from the end of the deck, so these are different cards from the ones shown on the syllabus page.
What is the purpose of loan documentation and name four essential documents in a typical lending transaction.
Documentation legally evidences the debt, the terms, and the bank's security/charge, making the facility enforceable. Essentials: Loan/Finance Agreement, Demand Promissory Note (DP Note), Letter of Hypothecation/Pledge or Mortgage Deed, Personal/Corporate Guarantee, and Letter of Continuity.
What is a "Letter of Continuity" and why is it taken with a Demand Promissory Note?
A Letter of Continuity makes the Demand Promissory Note a continuing security for a running/revolving facility, so the DP Note covers the fluctuating outstanding balance over time rather than just a single drawdown.
Define consumer financing as per SBP Prudential Regulations.
Consumer financing means any financing allowed to individuals for meeting personal, family, or household needs. SBP categories include: credit cards, auto loans, housing finance, personal loans, and consumer durables.
What are the four (or five) main product categories under SBP's Prudential Regulations for Consumer Financing?
Credit Cards, Auto Loans, Housing Finance, Personal Loans, and (where applicable) financing for Consumer Durables.
What is the key difference between a "credit card" and a "charge card"?
A credit card allows revolving credit — the holder may pay a minimum amount and roll over the balance with interest/markup. A charge card requires the full outstanding balance to be paid in full each billing cycle (no revolving credit).
On a credit card, what is the difference between the "minimum payment" and the consequences of paying only it?
The minimum payment is the smallest amount (a set percentage of outstanding) needed to keep the account current. Paying only the minimum keeps the account in order but causes the remaining balance to accrue markup/finance charges, increasing the total cost.
What is a "personal loan" and is it typically secured or unsecured?
A personal loan is a consumer facility for personal needs (e.g., wedding, education, travel), usually clean/unsecured, repaid in fixed equal monthly installments (EMIs), and priced higher due to absence of collateral.
In auto finance, what is the typical maximum financing tenor and the role of the down payment / equity?
Auto finance tenors typically range up to 5–7 years. The borrower pays a down payment (equity, commonly 15–30%), and the financed vehicle itself serves as security (often via hypothecation/joint registration), with the bank's charge noted on registration documents.
In housing finance, what is the "Loan-to-Value" (LTV) ratio and why is it important?
LTV = Loan Amount / Appraised Property Value. It caps how much the bank lends against a property (e.g., 80–85% under SBP limits), ensuring an equity cushion so the bank can recover the loan even if property value falls.
What is the Debt-Burden Ratio (DBR) used in consumer financing and what is the SBP cap?
DBR = Total monthly debt obligations / Net monthly income. SBP Prudential Regulations cap the DBR for consumer financing (historically at 50% of net disposable income) to prevent over-indebtedness.
What is an EMI and write its formula.
EMI (Equated Monthly Installment) is a fixed monthly payment of principal plus markup. EMI = P × r × (1+r)^n / [(1+r)^n − 1], where P = principal, r = monthly markup rate, n = number of months.
Define "working capital" and "working capital finance."
Working capital = Current Assets − Current Liabilities, representing funds for day-to-day operations. Working capital finance is short-term financing (e.g., running finance, cash finance, FATR) to fund the operating cycle — inventory and receivables — bridging the gap between cash outflows and inflows.
What is the "operating cycle" (cash conversion cycle) and its formula?
It is the time to convert resources into cash. Cash Conversion Cycle = Days Inventory Outstanding + Days Sales Outstanding − Days Payable Outstanding. A longer cycle requires more working capital finance.
What is term finance and how does it differ from working capital finance?
Term finance is medium/long-term lending (typically 1–10 years) for acquiring fixed assets (plant, machinery, expansion), repaid in installments from project cash flows. Working capital finance is short-term (usually under 1 year) for operational liquidity, often revolving.
In project lending, what is the "debt-equity ratio" requirement and why does the sponsor's equity matter?
Project lending typically requires a prescribed debt-equity mix (e.g., 60:40 or 70:30). The sponsor's equity demonstrates commitment, provides a loss-absorbing cushion, and aligns the sponsor's interest with the lender's, reducing moral hazard.
What is a "feasibility study" and why is it central to project/term lending appraisal?
A feasibility study assesses a project's technical, commercial, financial, managerial, and economic viability — including projected cash flows, IRR, NPV, payback, and sensitivity analysis — to determine whether the project can generate enough cash to service the debt.
What does NPV represent and what is the decision rule for a project loan?
Net Present Value (NPV) = present value of future cash inflows − initial investment, discounted at the required rate. Decision rule: accept if NPV > 0 (project adds value and can support debt); reject if NPV < 0.
What is IRR and how is it used in evaluating project lending viability?
Internal Rate of Return (IRR) is the discount rate at which a project's NPV equals zero. A project is viable for lending if IRR exceeds the cost of capital / required return; lenders compare IRR against the financing cost.
How does SBP define an SME (Small and Medium Enterprise) for financing purposes?
Under SBP regulations an SME is defined by employment and/or annual sales turnover thresholds (e.g., small enterprises up to a specified number of employees and turnover, medium enterprises within higher specified limits), distinguishing them from corporate borrowers and warranting tailored prudential treatment.
Why is SME financing considered higher risk, and name one technique banks use to mitigate it.
SMEs are higher risk due to limited/unaudited financials, weak documentation, lower capitalization, and key-person dependence. Mitigants: program-based/cash-flow lending, credit scoring models, collateral or third-party (e.g., SBP/government) credit guarantees, and close monitoring.
What are "Early Warning Signals" (EWS) in loan monitoring? Give three examples.
EWS are indicators that a borrower's repayment capacity is deteriorating. Examples: delayed/partial payments, frequent limit excesses or returned cheques, declining account turnover, falling sales/margins, delayed financial statements, and inventory/receivables build-up.
Under SBP Prudential Regulations, into what categories are non-performing loans (NPLs) classified, and what is the overdue trigger for each?
OAEM (Other Assets Especially Mentioned): overdue 90 days; Substandard: overdue 90 days–<180 days (markup/principal); Doubtful: overdue 180 days–<1 year; Loss: overdue 1 year or more (1 year+). (Triggers differ slightly by category of finance.)
What is "provisioning" and what general provisioning percentages apply to Substandard, Doubtful, and Loss categories under SBP rules?
Provisioning is setting aside reserves against expected loan losses (after deducting eligible collateral/FSV benefit). Standard rates: Substandard 25%, Doubtful 50%, Loss 100% of the outstanding net of permissible deductions.
What is the difference between loan "rescheduling" and "restructuring" in recovery?
Rescheduling changes the repayment schedule/tenor (extending time, revising installments) without altering core terms. Restructuring involves broader changes to the facility terms — e.g., converting overdue markup to principal, changing pricing, or altering the facility type — to make a stressed loan viable. Both aim to rehabilitate a troubled borrower.
What this deck covers
The Lending, Products, Operations & Risks Management deck follows the JAIBP Lending, Products, Operations & Risks Management syllabus — 7 chapters and 21 topics — so questions land on material that is genuinely examinable rather than trivia around it. That works out to roughly 7.3 cards per chapter.
Answers are written to be recallable, not just readable — averaging about 243 characters, which is long enough to carry the reasoning and short enough to say out loud.
A deck like this earns its keep on the second and third pass. Read the syllabus first so you know the shape of the subject, then use the cards to find the specific facts that have not stuck.
Lending, Products, Operations & Risks Management flashcards FAQ
How many Lending, Products, Operations & Risks Management flashcards are in this JAIBP deck?
51 cards. This page previews 24 of them, sampled evenly across the deck so you can judge the difficulty before installing anything.
Are these JAIBP flashcards free?
Yes. The preview here is free to read with no signup, and the full 51-card deck is free inside the Examius app.
What do the Lending, Products, Operations & Risks Management cards cover?
They follow the JAIBP Lending, Products, Operations & Risks Management syllabus — 7 chapters and 21 topics — so the questions track what is actually examinable.
How should I use these flashcards?
Read the syllabus first so you know the shape of the subject, then drill the deck. Examius schedules each card with spaced repetition, so cards you keep missing come back sooner and ones you know drift further apart.