LENDING POLICIES

It is neither feasible subtitle style Click to edit Master nor desirable for the top management to review and clear every loan proposal that the bank receives. This arises not only due to the process involved in such an activity but also due to the numbers.

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A bank developed its loan policy, there will be certain significant issues which it needs to incorporate in the policy.

Click to edit Master subtitle style

5/11/12

Click to edit Master subtitle style

LENDING POLICY CONSISTS OF: Loan objectives

Loan Objectives Volume of loans Geographical distribution Evaluation of proposals

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ANALYSIS OF FUNDAMENTAL FACTORS

Capital Structure Asset Liability Position Profitability Sensitivity to interest rate structure Asset Quality Tax Policies etc.,

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LENDING RATES The policy should state the returns, a particular loan should be giving at a particular level of risk The policy should also state the risk level at which at which no credit can be extended The loan should also give guide line for selecting a gloating (or) fixed rate of interest. 5/11/12

GENERAL PRINCIPLES OF SOUND LENDING

Safety Liquidity Profitability Security Purpose of the loan Diversification of risks Assured repayment Social objectives The law of limitation act
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LOAN ADMINISTRATION Effective administration is the key to the success of the lending policy For improving the efficiency, the authority of the loan executives should be clearly states as also their responsibilities The loan policy should state the sanctioning powers of the 5/11/12

Thank u.
PRESENTED BY: PNA ANJI BABU 5/11/12 FINAL MBA