GENERAL CONSIDERATIONS FOR

BANK LOANRITU

M-COM(E-COM)

INTRODUCTIONGranting of advances is the primary function of a bank. A major portion of its funds is used for this purpose and this also the major sources of bank’s income . However, lending money is notwithout risk and ,therefore, a banker must takeProper precaution in this process. Some of the Important consideration to be kept in mind by a banker.

CONSIDERATION FOR SOUND LENDING

While lending money the banker has to take into Account various consideration .

SAFETY:- The borrower is in a position to repay the loan ,along with interest ,according to the terms of the loan contract.

LIQUIDITY:-The banker must ensure that the borrower is able to repay the loan on demand or within a short period.

PROFITABILIY:-they must employ their funds profitably so as to earn sufficient income .

PURPOSE:-Bank do not grant loans for each and every purpose , they ensure the safety and liquidity of their funds by granting loan for productive purpose.

THE PRINCIPLE OF DIVERSIFICATION OF RISKS:-To safeguard his interest against unforeseen contingencies ,the banker follows the principle of diversification of risks.

BANK LENDING -POLICIES Lending policies and careful practices are Essential if a bank is to perform its credit

Creation function effectively. As the bank grow in size and the number

of banking personnel Involved in extending credit increase , it become

essentials to put the lending policy on a formal footing.

FACTOR AFFECTING LENDING POLICIES

ASCERTANING TOTAL CREDIT REQUIREMENT OF THE CREDIT MARKET.

APPRAISAL OF RESOURCES CAPITAL POSITION COMPETITIVE POSITION LOCAL AND NATIONAL ECONOMIC

CONDITIONS. MONETARY AND FISCAL POLICY

ABILITY AND EXPERIENCE OF LOAN STAFF

DEPOSIT VARIABILITY EARNING REQUIREMENT