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Haircut

Haircut in finance refers to a reduction applied to the value of an asset. This happens when the lender (like a bank) has to settle for a lower value than it was supposed to get back. For example, let’s say a bank gives a loan of Rs 1 crore to a borrower. At the time of returning, the borrower is not capable of paying back the entire amount. The borrower can either pay back Rs 50 lakh or default on the loan itself. If the bank accepts the Rs 50 lakh offer from the borrower, it is said that the bank took a 50% haircut on the loan.

This is negative news of that Bank and also its stock price is low.

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