Hello, Would like to ask regarding Question 9, why would there be liquidity problems if the interest is accrued? Thanks a lot in advance again!
Hi Under this product, interest accrued on the loan is added to the outstanding loan amount rather than being paid by the borrower in cash. This means that the bank does not receive a regular source of cash income from this product, which could put pressure on its own liquidity needs (ie needing cash to make payments out). I think that's probably what the examiners meant by that statement.
