PRINCIPLES OF LENDING, DIFFERENT TYPES OF BORROWERS AND TYPES OF CREDIT FACILITIES
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Principles and Practices of Banking — JAIIB.
One-liners from this chapter
Free sample — 8 of 65 rapid-fire Q&A cards.
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.
What is the principle of profitability in bank lending?
Profitability means the interest and other income earned on loans must cover the cost of funds and administrative expenses while yielding a reasonable profit for the bank.
What happens when a minor repays a loan taken from a bank?
Repayment is valid but the original loan agreement remains void.
What is the principle of purpose in bank lending?
Banks should lend only for productive and lawful purposes. Loans for speculative, anti-social, or illegal activities must be avoided to ensure quality of credit.
What is a 'co-borrower' in the context of bank lending?
A person who shares equal liability with the primary borrower for repayment.
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