Watch out full video on youtube- https://youtu.be/zBUSzKnK9bw Principles of Credit Lending 1. Safety 2. Liquidity 3.Spread 4. Security 5. Purpose 6. Profitability 7. Policy Validation Thank You For Watching Subscribe to DevTech Finance

1. DEVTECH FINANCE
CREDIT MANAGEMENT
PRINCIPLES OF
CREDIT LENDING

2. CREDIT
LENDING
SAFETY
LIQUIDITY
PROFITABILITY
POLICY
VALIDATIONSECURITY
PURPOSE
SPREAD

3. SAFETY
• The Banker should ensure that the funds lent are safe and would be
repaid by the borrower as per the terms of sanction.
• The credit policy and the guidelines of the bank helps to take proper
decision safety of loans granted.
• Since the major source of loan given is deposit that belong to customers
the banker should ensure that amount lent would be received back with
interest.

4. LIQUIDITY
• The ability of bank to convert the assets into cash. Entire amount that a bank
mobilizes as deposits cannot be lent. A portion of the deposits should be kept
with RBI in form of CRR and another sizeable portion as SLR should be
invested in approved securities.
• RBI changes CRR and SLR as part of credit policy announcements to control
the money supply in the economy.
• If money supply is more RBI tends to increase the CRR so that the lendable
funds with commercial banks are reduced and vice-versa.

5. SECURITY
• The asset acquired out of bank finance is the primary security for the loan
borrowed.
• If higher risk is involved in the loan, additional security is required in form of
immovable property or securities termed as collateral.
• Collateral security is sold as last resort by the bank in case the borrower
defaults in repayment despite various steps taken.

6. SPREAD
• Entire credit cannot be granted to an individual customer or a particular
industry or a particular location.
• Credit should be spread across various sectors and different classes of
people and different geographical areas.
• Diversification to mitigate risk involved in credit business.
• Priority sector lending mandated by govt. for development of economy &
society as whole.

7. PURPOSE
• The loan granted should be for an approved purpose and productive activity.
• The purpose of loan should be for a business that is legally permissible and
economically feasible.
• The banker expect from the customer to repay the dues from business
income and thus gives utmost importance to viability of the project for which
credit is granted.

8. PROFITABILITY
• Profit as in all the business is the main objective of banking business as well.
• Increase customer base and revenue.
• Cost benefit analysis.
• Capturing market share.

9. POLICY VALIDATION
• RBI credit policy
• Banks credit policy
• Priority sector lending
• Not opposed to national interest
• Basel Norms

10. THANK YOU FOR WATCHING
DEVTECH
FINANCE