These days the talk of the town……. oops talk of the whole globe is failure of several banks in US. But I would say it is not the failure of the financial institutions but due the business model they were having. But before getting to know what the model is, its better to know a few terms which is being on air for a while…….. (or at least the way I have understood thoseJJJJ) 1. Sub prime lending: That is nothing but lending to some one whom u know so well that he/she will have problems in repaying the loan. Sub-prime works in a very simple way: 1. Give a loan to some one who doesn’t have a credit rating worth a loan. 2. The loan period will be usually for a very long period. Say 30 yrs. 3. The person taking the loan will be taking the loan under the impression that after some time he will be able to make some money and settle the loan. 4. The lending terms usually will be like interest fixed for first 2 yrs. (for selling the loan to the poor borrower) 5. After the fixed rate perio
Chartered Accountant specializing in Indirect Tax Compliance & Litigation, Management Consultancy and Internal Controls