Q. Consider the following statements:
1.A loan loss provision is a cash reserve that banks set aside to cover losses incurred from defaulted loans.
2.The level of loan loss provision is determined based on the level expected to protect the safety and soundness of the bank.
Select the correct statements using the codes given below:

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: C
Notes:

Explanation –

Statement 1 and 2 are correct. A loan loss provision is a cash reserve that banks set aside to cover losses incurred from defaulted loans. The level of loan loss provision is determined based on the level expected to protect the safety and soundness of the bank.

Source: The Indian Express