Cardinal Principles of lending

The basic Principles of lending are

• Utilisation of funds for productive purposes, Risk management and Profitability
• Security, Liquidity and Profitability
• Safety, Liquidity and Profitability
• Security, Liquidity and Utility

Banks cannot lend for

• Agriculture, MSME
• Consumption purposes to Individuals
• Speculative purposes
• Employees of the Bank

RBI has prescribed Exposure norms to ensure

• To monitor Asset Liability mismatches
• Diversification of Risk
• To ensure profitability in Banks
• To ensure that Frauds do not happen

Loan to minors can be recovered

• if there is a 3rd party collateral
• By sueing the Minor
• If there is a 3rd party guarantee
• Loan cannot be recoverd under any circumstances

What are the qualities of acceptable securities?

• Utility and Marketability
• Marketability, Price Stability, Transferability
• Marketability and Location
• Location and Price Stability

These are statutory restrictions on lending

• 1. Loan for purchase of gold, loan against other bank deposits, loan for investing in kVP

• 2. Loan to company to buy back its owns shares/securities

• Both 1 and 2

• None of these

What are the cardinal principles of lending

• Credit worthiness, Purpose of loan, security, cash flows and source of repayment
• Increasing credit after proper risk assessment
• Comply with policy guidelines
• All of these

These are the important aspects of appraisal

• 1.Character, Capacity, Capital, Collateral

• 2.Credit worthiness, Conditions, Cash flows

• only 1

• Both 1 and 2

Pricing in Banks is based on

• Sector to which the business belongs
• Risk profile and credit quality of borrower
• RBI stipulations on bench mark rates
• Customer's request

Negative list of borrowers are

• Those borrowers/guarantors who have defrauded our bank

• Employees dismissed by Bank for unauthorised absence

• All NPA borrowers

• All of these