BANK FUNDS AND

ADVANCES
• INTRODUCTION
• SOURCES OF BANK FUNDS
• PRINCIPLES OF INVESTMENT
• EMPLOYMENT/USES OF BANKS FUND
• 5C’S OF CREDIT MANAGEMENT
• BANKER CUSTOMER RELATIONSHIP
• MORTGAGE & HYPOTHECATION
INTRODUCTION

 Bank fund comprises mainly of money borrowed from various accountholders

through their accounts. They are represented as liability in the balance sheet
of the bank. Usually the bank utilizes this collected fund through different
ways in order to make profit. Bank must invest in the manner that it doesn't
only remain able to recover the principal but also achieve the economic
objective of its own and of its accountholders which requires certain
principles to be followed while utilizing these funds like liquidity, safety,
dispersal etc.
SOURCES OF BANK FUNDS

 CAPITAL
A. Paid-up
B. Subscribed
 RESERVE FUND
 LIQUID ASSETS
 BANK DEPOSITS
 INTER-BANK BORROWING
 OBTAINING LOAN
PRINCIPLES OF INVESTMENT

 Safety
 Liquidity
 Dispersal
 Security
 Remuneration or Profitability
 Management of Cash Reserves
 National Interest
 Purpose of Loan 
EMPLOYMENT/USES OF BANK’S FUNDS
 PROFITABLE
A. LENDING
a. Call loans
b. Overdrafts
c. Cash credit
d. Loans
e. Discounting bills of exchange
B. INVESTMENT
a. Govt. Securities
b. Provincial and Local Government Bonds
c. Foreign Governments' Bonds
d. Other Securities
 NON-PROFITABLE
a. Purchase of Fixed Assets
b. Cash Reserve
c. Bank Reserve with the Central Bank
5C’s OF CREDIT MANAGEMENT

 Character
 Capacity
 Capital
 Condition
 Cash Flow
BANKER CUSTOMER RELATIONSHIP

 Debtor and Creditor

 Bailor and Bailee
 Licensor and licesnsee
 Hypothecator and Hypothecatee
 Trustee and Beneficiary
 Agent and Principal
 Advisor and Client
 Mortgagor and Mortgagee
 Lessor and lessee
Mortgage and Hypothecation

 The main difference between a mortgage and a hypothecation is that a

mortgage is a charge created for property such as real estate that are
immovable while hypothecation applies to property that is moveable in
nature.