Banking Exam Question - What is Loan Loss Provision in Banks? In Which Condition Loan Loss Provision Can Do?

Introduction - Loan Loss Provision

Credit misfortune arrangement is a cost put aside as a recompense for uncollected advances and advance installments. This arrangement is utilized to cover various components related with potential advance misfortunes including terrible advances, client defaults and renegotiated terms of a credit that acquire lower than beforehand assessed installments. 

In spite of these changes, banks still need to represent advance defaults and costs that happen because of loaning. Credit misfortune arrangements are a standard bookkeeping alteration made to a bank's advance misfortune holds incorporated into the monetary explanations of banks. Advance misfortune arrangements are reliably made to consolidate changing projections for misfortunes from the bank's loaning items. While principles for loaning have enormously enhanced, banks still experience late advance installments and advance defaults.