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PRINCIPLES OF LENDING, DIFFERENT TYPES OF BORROWERS AND TYPES OF CREDIT FACILITIES
What is the primary principle of safety in bank lending?
Safety means the bank should lend money only to borrowers who can repay it on time. The bank must assess the creditworthiness and repayment capacity of the borrower before sanctioning a loan.
What is the principle of national interest in bank lending?
Banks must align lending with national economic development priorities.
What does the principle of liquidity mean in the context of bank lending?
Liquidity means the bank should be able to convert its loans and advances into cash quickly when needed. Banks must maintain adequate liquidity by ensuring loans are repayable within a reasonable time frame.
What is the 'canons of lending' concept in banking?
Fundamental principles guiding sound and prudent bank credit decisions.
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