Ranjit Sachin Sherine Sumesh Vaishnavi Prime Loans: Loans provided to borrowers with good credit histories and carries lower interest rates. SubPrime Loans: Loans offered to borrowers with bankruptcies, defaults, or late payment histories or loan given to borrower who doesn’t qualify for regular home loan. Banks in U.S.A came out with this type of loan. Unstable situation affecting a person, a group and society in general. Negative changes in the security, economic, social affairs when they occur abruptly without no warning. Until 2006, housing market was flourishing due to the fact that it was easy to get house loan. Individuals would take subprime mortgages, with the expectation that the value of their home would rise and they would be able to refinance their home before high interest come into effect. The demand of home loans increased and 3 stakeholders i.e; Bank, Financial institutions and borrrowers. However, housing bubble burst and housing prices had reached their peak. They are now on a decline. An overheated market in which there are too many buyers who are too keen to buy. As a result, prices rise way too fast, and thus this system becomes unsustainable. Eventually, some people start to sell out. The whole process goes into reverse rapidly, and the bubble bursts, with people selling in panic so that pric es plunge. Housing prices goes up because demand goes up. Housing bubbles usually start with an increase in demand, in the face of limited supply. Speculators enter the market, believing that profits can be made through short term buying and selling. This further derives demand. Large losses faced by Mortgage lenders, Insurance companies, Investment banks. There will be several implications in the banking sector of India, where banks have to follow stricter norms while providing loans. The foreign banks started unloading their holding in Indian Equities resulting in fall in the stock price and weakening the domestic currency. Subprime crisis has led to loss of confidence in investors in the stock market Indian banks had limited exposure to U.S mortgage market, so overall less impact was faced by India than other economies of the world. To help lower income people renegotiate their loans and stay in their homes. To lend loans at a normal rate. To provide liquidity to the needy financial institutions that they need.