Sub prime, the word, means subordinate to prime....In 2008, even those people were given loans who

Sub prime, the word, means subordinate to prime....In 2008, even those people were given loans who were having bad credit rating, who were not eligible for Prime loans(normal loans)... So, this let to not returning of loan amounts thereby increase in higher interest rate, leading to shut down of loan giving financial institutions.So, this is a crisis that occurs when loan is given to customers having poor credit rating who then are not able to return it..

 

From where do banks get to knw d credibility of d custmrs?

 

Any other criteria? Only if his income is good, is he credible then?

 

There are various credit rating agencies eg. CRISIL,ICRA, SAMERA, ONICRA, and one more CIBIL which does rating for only individuals. Also, the banks giving loan go and check on their own before giving loan...e.g if someone wants business loan they will go and check if he has the appropriate things - business, workers,etc which he has stated in his balancesheet on the basis of which he is gven the loan. So, in the future it doesn't turn NPA.

 

Sub prime crisis happen in USA when they give loans people to buy property of house. But suddenly prices of property goes down as a result many people not able to pay loan back and bank can not able to recover money even selling that property

 

No it happened once in 2008 which actually led to financial crisis in America. They don't keep happening there.. now their Federal Reserve is very strong.

 

House ke daam down huye to customers paisa wapas kyu nai kar sake? Tab to unka liya hua loan bach hi gya hoga.