Economics • Banking & FinanceMedium
What structural challenge do commercial bank branches face regarding Non-Performing Assets when lending to traditional horticulture and cardamom farming in remote areas of Sikkim?
A. Guaranteed zero default rates due to state intervention
B. High susceptibility to weather shocks, crop disease, and delayed market realization✓ Correct Answer
C. Excessive liquidity resulting in negative interest earnings
D. Immediate liquidation of collateral without legal hurdles
💡 Solution & Explanation
Horticulture and large cardamom cultivation in hill regions depend heavily on weather conditions, making them vulnerable to pest attacks and climatic variations that can impair borrower repayment capacity. Zero default rates do not exist in agricultural lending. Asset quality management in Sikkim requires specialized risk assessment tailored to perennial hill crops.
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