What is Principles of Sound Lending ?

Answer

1.      Safety

Credit should be given at right person at right time at right quantity.

It must be come back.

2.      Liquidity

Bank should not have negative Duration Gap or Asset Liability Mismatch.

3.      Profitability

Lending must reflect costs+earnings+ long term goal of a bank.

4.      Purpose

Purpose must be productive & generates adequate cash for repayment.

5.      Security

Security means things deposited as a guarantee of undertaking a loan to be forfeited in case of default.

6.      National Interest

It should play a role for the economic development of the country.

7.      Diversification

Don’t put all of your eggs in one basket

It reduces risks