Bank Lending And Loan Administration Pdf

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bank lending and loan administration pdf

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Liquidity is an important principle of bank lending. Bank lend for short periods only because they lend public money which can be withdrawn at any time by depositors. They, therefore, advance loans on the security of such assets which are easily marketable and convertible into cash at a short notice.

credit management and bank lending pdf

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Log In Sign Up. Download Free PDF. Kabir Hamid Tahir. Download PDF. A short summary of this paper. Uneven distribution of wealth in the society necessitated the need for banks to intermediate between the surplus and deficit units for economic growth and development. Lending is thus central and fundamental to the financial intermediation role of banks, making banks to granting different types of loans, with different periods of moratorium, rate of interest and repayment terms to their customers.

The lending function of banks is equally ingrained in the need to generate maximum return for the shareholders and maximum liquidity for the depositors, as well as achieve their objectives.

A bank is a financial intermediary for the safeguarding, transferring, exchanging, or lending of money. When customers deposit their money with a bank, they are giving the bank permission to borrow the money. This borrowed money is what is used for the loans to the bank customers. The bank pays a smaller amount of interest to the customer who allowed them to borrow the money and charges a larger amount of interest to the customer they lent the money to. The bank makes money from the difference in the interest.

If too many depositors run to withdraw their money like in a time of depression, backup systems like a consortium of banks and the Central Bank and other systems intervenes to get money to the banks to meet their obligations to depositors and save the bank from collapsing.

The Concept of Bank LendingBank lending is the granting of credit facilities to borrowers individuals and organizations at an interest rate, based on collateral security to be repaid after a period of time. An effective lending therefore is one that maximized profit to shareholders and liquidly to depositors, as well as, ensure societal economic development.

Objectives of Bank LendingThe Objectives of bank lending include: i Stimulate economic growth and development: This is done by lending money to businesses to purchase assets with that will grow their business, which will in turn produce more goods, create more sales, and stimulate the economy, while at the same time making enough profit off of the new assets to be able to pay the money back in a timely fashion with interest thereby making the bank to earn profits and deliver returns to its shareholders.

Part of the profit earned is given as dividend to shareholders while the remaining part is retain in the bank to enhance liquidity and provide for expansion and growth in the business, iv Realize government policy objectives: Banking is used as a vehicle for driving government monetary policy through expansion and contraction in the amount of credit facilities due to the economic situation of a country. Bank Policies On LendingCommercial banks are business entities which are established for the purpose of carrying out banking operations with the aim of earning reasonable returns for the shareholders.

This implies that such organizations cannot be operated effectively and efficiently without internal laws, regulations and procedures for transacting banking business. Hence the need for operating policies by commercial banks cannot be overemphasized. Nature of Bank Policies on OperationsThe bank policies are normally derived from the objectives of their operations which are products of their mission statements.

The bank policies are formulated with the intention of ensuring that the operations of the banks are established on sounding footing which conforms to the best practices of banking operations. This is because bank operations are basically embedded in financial intermediation; sourcing for funds from surplus areas and lending such funds to areas of needs.

Bank policies affect the organizational structure and by extension also influence the employment of the personnel.

Bank policies are also used to shape the bank personality and for shaping the desired course of action in terms of the operational direction of the banks. The formulation of bank policies can be the responsibility of the board of directors.

The policies can also be formulated by the chief executive officers and tabled before the board for consideration and approval before their implementation. In some instances, the policies can be formulated by committees constituted by the management for such purpose. The formulation of bank policies in unit banks with their operations being restricted to specific areas, such as the microfinance banks in the country, can be easily accomplished. This is because of such banks' nearness to their personnel and the understanding of the particular areas where they operate.

For instance, a microfinance bank would have distinct operational policies given the peculiar socio-economic conditions as compared to the operational policies for a microfinance banks which engage in business in an area like Lagos. These are also different from the operational policies of microfinance banks that are doing business in Bauchi. The operational policies of the branch banks do differ from those of the unit banks. This is because of the fact that their operations spread over a large geographical areas.

Therefore, the branch managers are expected to make some inputs into the overall corporate policies necessary for successful operations. Furthermore, the branch manager of each area may like to initiate a different policy on a particular matter which is dictated by the peculiar environment in issues such economic growth, economic activities, socioeconomic needs, and people's attitudes towards banks generally.

The operational policies of the banks, be they unit banks or branch banks, should be couched on the basis of flexibility due to the changing patterns of environmental conditions. Hence banking policies should be subjected to review on periodical basis because of the changing economic condition and other environmental dictates which shape banks' operations.

Therefore, the need for the formulation and constant review of the bank policies becomes very relevant in the areas of sourcing for deposits from the public, investment of funds on marketable securities, hedging against risks in operations, managing credit risks, and above all lending or granting credits, loans and advances to customers. Principles of Bank Lending PoliciesThere are basic principles which normally come into play when the commercial banks consider the establishment of lending policies for their operations.

Such principles of bank lending are as identified and discussed below. When a banker lends that the borrower is going to repay. If for example the borrower invest the money in unproductive and speculative venture or the borrower himself is dishonest the advance would be in jeopardy. Similarly if the borrower or suffer losses in his business due to incompetence the recovery would be difficult.

The bank ensures that the money advanced by him goes to the right type of borrower and is utilized in such a way that it will not only be safe at the time of lending but remain so throughout the period, and after serving a useful interest purpose in the trade or industry where it is employed to repaid with interest.

The borrower must be in position to repay within a reasonable time after demand for repayment is made and the source of repayment must be definite.

This is because bulk of the bank deposits are repayable on demand or short notice and liquidity of the borrower can affect the ability of the bank to repay its depositors on demand in spite of the safety.

They are usually granted with the intention of earning some income for the banks. This income can only be earned by the bank through the interest charges being made from the loans granted to customers.

The interest on loans from the banks to customers are normally established taking into consideration the prevailing market rate and the established bank rate by the apex bank in the economy, which is called the monetary policy rate. The interest rate being charged on loans by the commercial banks is normally higher than the bank rate being charged by the apex bank, and building into it other charges as may be determined by the banks. The loans being granted to customers are not normally concentrated in a particular type of sector but in different types of sectors, which will have to conform to the policy of sectorial distribution of loans as demanded by the apex bank.

The distribution of the loan portfolio is also imperative towards minimizing risks that are always inherent in lending of funds. The principle of diversity is also applicable to spreading loans to various industries, firms, businesses and trades. Hence, commercial banks do strive to spread of risks of investment in loan portfolio by giving out credits to various trades and industries.

For instance, a customer who applies for a loan facility should have his project or business evaluated to determine the possibility of such ventures generating constant income with which to serve the loan and make repayment on regular basis. Therefore, for a new project the technical feasibility and economic viability report will be evaluated to determine the nature of cash inflows in terms of stability of earnings, which will be used for repaying the loan and servicing it.

The regularity of the earnings is very important and this will depend on the prudent management of the project. In the case of existing business, the financial reports for a period of not less than five years on consecutive basis will be evaluated to determine the regularity and quantum of earnings.

Such assessment is used to evaluate the stability of such earnings towards definite repayment of loan facility. It would be important if the purpose is short and the risk is small and the money be applied for the purpose intended. Major Areas of Bank Policies on LendingThere are critical areas relating to lending that the banks do not normally take for grant in the formulation of bank policies. Such areas for policy formulation on bank lending are as identified and discussed below.

In setting the magnitude of loan that can be approved by the officers in charge of credits, certain factors are usually taken into consideration. In terms of policy on loan limit for the officers, the factors taking into account may include the position of the officer, e. In terms of the loan limit for the customers, the following factors, among others, are taken into consideration; creditworthiness of the customer; performance on the previous loans, for old customer; performance of the business in the last five years, at least, for new customer, his market share in the industry, e.

Furthermore, grading system can be used for setting the policies on loan limit such as portrayed by the Table 1. However, there is no hard and fast rule in the categorization of customers for the purpose of loan limit. A grading or categorization system being used by any bank for setting loan limits on customers depends on choice.

In related terms, such categorization of loan limits can be also be used to set loan mandate for the officers of the bank when it comes to approval of loans for the customers.

In the case of the branch manager, the usual policy on loan limit is for the bank to set the amount of funds that he or she can lend out to a customer.

The limit is regarded as his or her authority in lending, and any loan request in excess of such lending authority will have to be communicated to the head office for advice. A loan request in excess of the branch manager's authority in lending can as well be communicated to the area manager who may have the authority to sanction it without recourse to the head office for the necessary approval.

The policies on granting of loans, their supervision, and recovery drive are normally established taking into consideration the relevant strategies used in the past and those ones being utilized by other banks. Bank policies on loan supervision are used to address responsibilities such as: a Teams to be constituted for checks and balances; b Superior officer s to be in charge of reports and evaluation, e. The policy is on the following areas of responsibilities: a Manager's responsibility in preventing credit risks; b Assistant Manager's responsibility in credit risk management; c Loan officers' responsibility in preventing credit risks; d Hierarchical authority for handling credit risks; and e Actions necessary in managing difficult beneficiaries of loans.

There are other areas of responsibilities for the management of credit risks by various bank officials, which are not covered by above list. Therefore, the list is by no means exhaustive for the purpose of credit management of credit risks by the banks. Such policy should be used to specify the necessary actions to be initiated and taken by the bank officials to recover the amount of loan involved in the transaction.

The necessary directives in managing difficult account involve the following considerations: a The use of committee for the recovery of the funds; b Discussion with the difficult customer by the bank officials; c Visit to the business premises of the customer for assessment; d The use of subtle pressure on the customer, e. In addition to the above, there are other areas for policy actions on difficult customers, which various banks can formulate to manage them.

More so, necessary responsibilities for the management of the difficult customers are formulated and assigned to various bank officials, which are not covered by above list. Therefore, the list is by no means exhaustive for the purpose of managing difficult customers by the banks.

The control of customer account is necessary because of the fact that a customer can be playing pranks on the repayment of loan and payment of interest on such funds. The policy on control of customer account always emphases the following considerations: i Constant monitoring of repayment status; ii Periodic statement being issued to the customer; iii Constant reminder on outstanding balance of the loan; iv Computer alert sent to the customer whenever any payment is made; v Any discrepancy such as delay or amount less than expected in repayment be communicated to the customer immediately; vi Computer alert on due date for next payment be sent to the customer on monthly basis; vii Monitoring of withdrawals from the customer account as not to jeopardize repayment of funds loaned to him or her.

The above list is by no means is exhaustive, and therefore, it is left for individual banks to decide on the necessary considerations in this respect. It is necessary in the management of the bank's liquidity particularly in the case of big time customers of the bank.

In addition, there is every likelihood that such customers will use their accounts to demand for overdraft or loans in the course of their operations. There are areas on which policies can be established for such purpose. The account turnover, trends in account balance with the bank, amount in cheques drawn and customer's performance in standing order can be used to monitor the account of such customer who are known for keeping large amount of funds in their account: Credit Extension By BanksCommercial banks operate business that is woven around financial intermediation activities.

In fundamental terms, banks are institutions which evolve for the business of keeping, lending and exchanging of money. Therefore, banks are organizations whose principal operations are entrenched in accumulation of idle funds from the general public with the purpose of lending such funds to business entities and individuals as well as the government institutions.

The position of the commercial banks is that of retail banking institutions that accept deposits from the public and in turn lend such funds to some members of the public. Nature of Commercial Banking OperationsBanks generally owe their operations in financial intermediation activities.

Complete Lecture Notes for MAFS 616 Bank Lending and Credit Administration

This paper studies ten years of annual financial data from four state-owned banks, macroeconomic data and data from the financial technology fin-tech industry using ratio analysis, dynamic estimation and common size statements analysis. The study also considers the analysis of independent attributes such as macroeconomic factors, for example, GDP growth, inflation, interest rates and fin-tech lending supply that could affect the financial performance of the banks. On the other hand, this research emphasizes that competition with fin-tech companies could affect bank performance and the capacity to supply loans. In general, the results show that most of the banks are still capable and comply with supply lending to MSMEs as mandated by the regulation in the short term. However, in the long term, the intention is moving slowly and tends to decrease - possibly due to the dynamics of economic growth and the development of financial technology companies. Ab-Rahim, R. International Business Research, 11 4 ,

Skip to content. All Homes Search Contact. Liquidity plays a major role when a bank is into lending money. Credit Management, meaning the management of credit granted to its customers is a discipline increasingly identified as strategic by companies. Re-engineer corporate credit management to address customer needs and enhance business performance. The foundation for any loan review system is an accurate and timely loan classification or credit grading system. With the growth in entrepreneurial activities in Nigeria, the demand for bank loans is at the increase.

By providing ready access to funding, the discount window helps depository institutions manage their liquidity risks efficiently and avoid actions that have negative consequences for their customers, such as withdrawing credit during times of market stress. Thus, the discount window supports the smooth flow of credit to households and businesses. Providing liquidity in this way is one of the original purposes of the Federal Reserve System and other central banks around the world. The purpose of this information is to clarify the policies that govern the use of Federal Reserve credit and describe Federal Reserve lending programs. Discount Window policies and programs have evolved in response to the changing needs of the economy and financial system. For Example, the primary and secondary credit programs replaced the adjustment credit and extended credit programs effective January 9,

The Concept of Bank LendingBank lending is the granting of credit facilities to borrowers This is because bank operations are basically embedded in financial.

Loan Portfolio Management

Using a framework of volatile markets Emerging Market Bank Lending and Credit Risk Control covers the theoretical and practical foundations of contemporary credit risk with implications for bank management. Drawing a direct connection between risk and its effects on credit analysis and decisions, the book discusses how credit risk should be correctly anticipated and its impact mitigated within framework of sound credit culture and process in line with the Basel Accords. This is the only practical book that specifically guides bankers through the analysis and management of the peculiar credit risks of counterparties in emerging economies. Each chapter features a one-page overview that introduces its subject and its outcomes. Chapters include summaries, review questions, references, and endnotes.

The loan can be used by retirees for many purposes, including travel and general spending. No guarantor needed — you can use your family inheritance pension as collateral. Receive credit up to the amount stated in your certificate of family inheritance pension. Pay only interest, or principal plus interest, with lower monthly payments.

Accessing real credit data via the accompanying website www. The book begins by defining what credit is and its advantages and disadvantages, the causes of credit risk, a brief historical overview of credit risk analysis and the strategic importance of credit risk in institutions that rely on claims. See to it that every bit of detail undergoes analytical rigor. Credit risk is typically represented by means of three factors: default risk, loss risk and exposure risk. The higher the Bank exposure to credit risk, the higher the tendency of.

Online Banking

 - И он безжизненно откинулся на спинку стула. Сьюзан была понятна боль, которую испытывал шеф. Его так просто обвели вокруг пальца. Танкадо не собирался продавать свой алгоритм никакой компьютерной компании, потому что никакого алгоритма не. Цифровая крепость оказалась фарсом, наживкой для Агентства национальной безопасности. Когда Стратмор предпринимал какой-либо шаг, Танкадо стоял за сценой, дергая за веревочки. - Я обошел программу Сквозь строй, - простонал коммандер.

Волосатая грудь начиналась сразу под тройным подбородком и выпячивалась ничуть не меньше, чем живот необъятного размера, на котором едва сходился пояс купального халата с фирменным знаком отеля. Беккер старался придать своему лицу как можно более угрожающее выражение. - Ваше имя. Красное лицо немца исказилось от страха. - Was willst du. Чего вы хотите.

Сверху хлестала вода, прямо как во время полночного шторма. Стратмор откинул голову назад, словно давая каплям возможность смыть с него вину. Я из тех, кто добивается своей цели. Стратмор наклонился и, зачерпнув воды, смыл со своих рук частицы плоти Чатрукьяна. Его мечта о Цифровой крепости рухнула, и он полностью отдавал себе в этом отчет.

 Я думал, вы из городского… хотите заставить меня… - Он замолчал и как-то странно посмотрел на Беккера.  - Если не по поводу колонки, то зачем вы пришли. Хороший вопрос, подумал Беккер, рисуя в воображении горы Смоки-Маунтинс. - Просто неформальная дипломатическая любезность, - солгал. - Дипломатическая любезность? - изумился старик.

Complete Lecture Notes for MAFS 616 Bank Lending and Credit Administration


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This course, BFN Bank lending and Loan Administration expects you to do a lot of reading in order to cover the materials in the course material. It implies.

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02.05.2021 at 21:13 - Reply

Assessing Bank-to-Bank Credit. policies, credit administration, and the quality of the loan portfolio greatest credit risk and potential loss exposure to banks.

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