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PRINCIPLES OF LENDING, WORKING CAPITAL ASSESSMENT & CREDIT MONITORING
What is the primary principle of lending that ensures a bank's funds are deployed in safe and productive assets?
The principle of safety requires that loans are extended only to creditworthy borrowers who have the capacity and willingness to repay, ensuring the bank's funds remain secure.
What is the principle of safety in bank lending?
Loans should be given to creditworthy borrowers with adequate security.
What does the principle of liquidity in bank lending refer to?
Liquidity in lending means the bank should be able to recover its funds on demand or within a reasonable period, ensuring loans are structured with clear repayment schedules aligned to the borrower's cash flows.
What is the Second Method of Lending recommended by the Tandon Committee?
Bank finances 75% of net working capital gap (Current Assets minus Current Liabilities excluding bank borrowings).
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