Consider the following statements:

Statement-I: Syndicated lending spreads the risk of borrower default across multiple lenders.

Statement-II: The syndicated loan can be fixed amount/lump sum of funds, but cannot be a credit line.

Which one of the following is correct in respect of the above statements?

Statement-I is correct. The primary purpose of a syndicated loan is to allow a group of lenders (the syndicate) to provide a very large loan to a single borrower. By doing this, no single bank is exposed to the entire risk of the borrower defaulting. If the borrower fails to pay, the loss is shared among the participating banks according to their percentage of the total loan

Analysis of Statement-II

Statement-II is incorrect. A syndicated loan is highly flexible in its structure. While it can certainly be a Term Loan (a fixed lump sum), it can also be a Revolving Credit Line (or "revolver"). In fact, many large corporate syndications consist of both—a term loan and a revolving credit facility—to help the company manage both long-term investment and short-term operational cash flow.Key Components of Syndicated LendingThe Lead Arranger: The "mandated" bank that negotiates the terms and brings other banks into the deal.The Agent Bank: The bank that handles the administration, such as distributing interest payments to all the members of the syndicate.Diversification: Lenders use syndication to diversify their portfolios across different industries and geographies without over-committing capital to one entity.Loan TypeDescriptionCan it be Syndicated?Term LoanA lump sum paid upfront, repaid over a set schedule.YesRevolving CreditA "line" where the borrower can draw, repay, and redraw funds.YesLetter of CreditA guarantee from the banks to a third party.Yes