The correct answer is: C. Both A and B
Unsecured exposure will attract a provision of 20% for assets in sub-standard category and 100% for assets in doubtful and loss category.
A provision is an amount that a bank sets aside to cover potential losses on loans. The amount of the provision is based on the riskiness of the loan. Loans that are considered to be more risky will have a higher provision.
Unsecured loans are loans that are not backed by collateral. This means that the lender has no security if the borrower defaults on the loan. As a result, unsecured loans are considered to be more risky than secured loans.
The sub-standard category is the second lowest category of loan quality. Loans in this category are considered to be impaired, but they are still expected to be repaid. The provision for loans in this category is 20%.
The doubtful category is the lowest category of loan quality. Loans in this category are considered to be unlikely to be repaid. The provision for loans in this category is 100%.
The loss category is the category for loans that are considered to be uncollectible. The provision for loans in this category is 100%.