Economics · Non-Performing Assets and Banking Stress
A stressed banking system can weaken economic growth because financial intermediation becomes impaired when banks face weak capital and poor asset quality. This happens mainly because stressed banks:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1can ignore provisioning requirements temporarily
- 2are exempted from prudential norms
- 3may become risk-averse and constrained in fresh lending✓
- 4always expand credit more aggressively
Correct answer
may become risk-averse and constrained in fresh lending
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