How Can I Sign Kansas Banking Presentation

How can i industry sign banking kansas presentation fast

hello everyone today we will discuss another topic under banking and insurance law today's topic is principles of lending here we will discuss about the principles which are to be followed by a bank or banking institution while giving the advances or loans to the customers or the people the list of topics to be covered here is the we will discuss the concept of lending then certain principles of lending which are safety principles security principle purpose principle liquidity diversification of loans and profitability principle concept concept of lending here lending means to provide money temporarily on condition that the amount borrowed be returned usually with an interest fee a lender is a person who makes these funds available to another with the expectation that the funds will be repaid with some interest in india basically the business of lending is to be carried on by the banking sector and mostly people approach for the funds which are temporarily available on this condition that the amount borrowed be written to them are done by the banking sector and different bank commercial banks only the main business of banking consists of receiving deposits and lending for production purposes a deployment of funds is regulated by the directives of the reserve bank of india after meeting statutory liquidity ratio and investments the funds available for lending is determined these lendable funds determine criteria for a proper depository and for pursuing the necessary lending policies and scheme so basically all the policies and schemes which are with respect to the loan and advances purposes are formulated and regulated by the reserve bank of india after meeting certain ratios these funds made available to the other people lending should be in such a manner that the bank is in a position to meet unexpected demands lending money is the most important function of banks in the context of economic development in general and the development of for and for of the development of trade commerce and industry in particular lending is not without risk the banker has to take at most precautions in lending because he deals essentially with the funds of other people those funds have to be repaid on demand by the banker so there are certain principles or consideration for sound lending of money we all know that the banking business is mostly depend upon the deposits by the by their customers into the banks and then the banker use these funds deposited in the bank by the customers they use this particular deposit for the advances and loans purposes to make the profit out of it while doing this lending business the banker has to taken care of certain principles of lending so these are the basic principles of lending in banking industries which are safety security purpose liquidity diversification of loans and profitability first principle is safety since a banker deals with the money belonging to others he has to assure the safety of the funds that he lends out if money is lent to people who do not possess adequate capacity to repay money borrowed from a bank the banker would be in a difficult position because he will not be able you know he will not be in a position to own honor the claims of his depositors depositors keep money with the bank in good faith and trust if a banker is unable to honor their claims of withdrawals the whole banking business would be in trouble therefore he must see that the funds are safe the money land should come back in the normal course a few loans turned bad due to the dishonesty of the borrower which could not be detected before the loans were dispersed so for safety purposes sometimes some valuable property both movable and immovable which is owned by the borrower is used as the security and the banker takes these properties movable and immovable as a security and keep it with them and after uh ensuring that the value of the security the banker provides the loan to the borrower depending upon the valuable they have submitted to the bank as a security next principle is of security banks usually support their loans by asking the borrower to deposit approved security as an insurance against unforeseen contingencies tangible security does offer a question for safety but only up to a point in a falling market the value of security depreciates very fast and may prove inadequate to recover the advance security offered by a person borrowing money is also important as it is an insurance against a non-repayment in case of default recovery becomes easier if proper securities are obtained while granting the advances a banker has to ensure the value of the securities while granting the loan as in case of default it will help the banker to recover it at their advances only if the value of the securities are in accordance with the granting advances security is taken as a form of insurance so that it is available to fall back upon in the event of some unforeseen development taking place as good jeopardize the advance next principle is of purpose it is a responsibility of a banker to investigate into the purpose for which money is being borrowed by a person repayment of loans depends up to a large extent on the purpose for which the loans are being taken when advances are guaranteed for productive purposes resulting in the creation of income yielding assets and there is a guarantee of repayment also in case of default such loans are recovered by sale of assets but if loans are given for unproductive purposes there is a lot of uncertainty about recovering such loans the banker has to examine whether the purpose for which loan would be used is desirable one from the point of view of the accepted economic policies of the government and the directives of the country's central bank next principle is liquidity liquidity means a bank's ability to meet any claim on it for cash on demand it is the capacity of the bank to honor its obligations it implies the readiness with which the bank can convert its assets into cash in time of emergency since a banker does his business with the borrowed money which is subject to repayment on demand he has to ensure liquidity while lending money depositors develop faith in bank on the basis of liquidity therefore this principle is as important as that of safety another reason for the importance of liquidity is that the cost of borrowing from the rbi depends on net liquidity ratio that is the ratio between net liquidity assets and the total demand and time deposits next principle is diversification of loans since every loan has a risk it is better to give advances for different purposes and spread the risk it is dangerous to concentrate advances in any particular area or field or sector it is always good to have a wider spread in terms of the number of borrowers number of sectors geographical area and securities the basic idea behind this principle of lending is not to keep all eggs in one basket banks take calculated risk in granting loads but sometimes their calculations do go wrong to minimize the incidence of losses as a result of advances turning bad a bank spreads the risk by dispersal of its funds to a large number of borrowers instead to confining of its advances to a few by inc raising large amount to them next principle is six profitability principle a commercial bank is essentially a profit hunting organization with the main objectives of making profits the banker is in a position to earn profits through advances profits of a bank depends upon the interest income earned on the advances made therefore bankers should not ignore the profit motive while granting loans a bank should ensure that the funds that are lent bring a reasonable good return at the same time they should also possess liquidity in other words a bank has to reconcile the objectives of liquidity and profitability and maintain them in optimum proportion a profitability of advance is to ensure adequate income to cover up the banks cost that is interest rate establishment charges their non-interest charges like office maintenance depreciation and bad debts you