Bank of Baroda is one of the largest banks in India. The recent financial report of the bank shows that 60% of its loan portfolio are composed of agricultural loans provided to farmers and 20% of the loans account consumer loans offered to salaried employees. The remaining 20% accounts for different types of loans including credit card, mortgage and business loans. For the past two years, the financial report of the bank report an increase in the amount of unrepaid loans. Currently, 35% of the loan portfolio are overdue 90 days and the bank is worried about the rise in default risk.

Required: (a) Discuss the potential causes of the rise in default risk (2 pts.) (b) Discuss and analyze the lending activity of the bank using the five C's of credit risk

analysis (4 pts.)