Banking · Risk Diversification
A bank uses diversification across sectors, geographies, products, and borrower categories as part of its overall risk framework. The main reason diversification is considered a risk-management tool is that it:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
Share:
- 1Replaces the need for capital adequacy and provisioning norms
- 2Reduces concentration by spreading exposures so that adverse events in one segment do not fully damage the whole portfolio✓
- 3Ensures that credit appraisal standards may be relaxed safely
- 4Guarantees elimination of all losses under every condition
Correct answer
Reduces concentration by spreading exposures so that adverse events in one segment do not fully damage the whole portfolio
Download Single Question PDF
Save this question and verified answer as a clean study sheet with live clickable link.
👥
Share with Friends & Study Groups
Challenge your peer aspirants on WhatsApp or Telegram to solve this question!
Online Test Series
Start Free Mock Test →Preparing for Banking?
Practice full-length mock tests with real exam timers, instant score analysis, and all-India ranking.
Chapter Practice
Practice Risk Diversification MCQs →Want more practice questions on Risk Diversification?
Solve complete topic-wise tests with detailed solutions on GkGet.
Related Practice Questions
Recommended practice questions in Banking · Risk Diversification