Final answer:
The option that is NOT generally a reason for lenders to sell loans into the secondary market is 'c) Increase in interest rates', as rising interest rates typically decrease the value of existing loans, making them less attractive for sale.
Step-by-step explanation:
The question asks which of the following is NOT generally a reason for lenders to sell loans into the secondary market. The options are liquidity, risk management, increase in interest rates, and portfolio diversification. Selling loans in the secondary market is generally done for reasons such as liquidity, risk management, and portfolio diversification. These moves help the lenders free up capital, manage and spread out the risk of loan defaults, and diversify their investment portfolio.
An increase in interest rates is generally not a reason banks sell loans into the secondary market because when interest rates rise, the value of the existing loans with lower rates typically decreases, making them less attractive to investors. Therefore, 'c) Increase in interest rates' would not be the driving reason for selling loans.