When a loan goes npa eventually bank make it written off or lost asset. By making loan into lost as

When a loan goes npa eventually bank make it written off or lost asset. By making loan into lost asset they remove them from thier balance sheet. But all this lost asset recover by ots or one time settlement. Let that a loan is rs. 100 which goes into lost asset. Then banks decides to settle it in ots of rs. 60 and remaining rs.40 bank digest it as thier minuman loss. This rs. 40 is called haircut in banking. Or u can say a discount in loan amount before ots is called haircut. This type of haircut mainly given in agri loans. Hope u will understand.

 

Haha. Am not sir.... Am ur friend.... Do u understand now?

 

yes this is correct....also thw definition sajag gave is also true....haircut term is used in both placed

 

In finance, a haircut is the difference between the market value of an asset used as loan collateral and the amount of the loan. The amount of the haircutreflects the lender's perceived risk of loss from the asset falling in value or being sold in a fire sale.

 

Enthaka mundhu eppudo detailed explanation ecchinattu vunna

 

Ledhanukunta bhayya. Post chesa but answers aithey raledhu. Andukey reposted

 

Let say u gave a loan of 100 rs to smone!!!!Later on, the person says he will only be able to repay rs 80 only!!!!And in case you accept it, den u had a haircut of 20 rs!!!!!

 

Jab banker Apne Baal nauch le phir bhi customer na samjhe

 

in banking parlance, haircut is difference between the market value of an assets use as loan collateral and the amount of loan....

 

haircut is a frequently used word in banking parlance. As such it independently has no specific meaning yet broadly you assume it to be kind of financial adjustments for meeting out regulatory norms. one example i can share is haircut of 50% of outstanding amount in AUCA accounts whenever there is negotiations in Lok Adalats.I hope this helps.