Page 101 - DCOM208_BANKING_THEORY_AND_PRACTICE

Banking Theory and Practice Mahesh Kumar Sarva, Lovely Professional University

Notes Unit 7: Loans and Advances

CONTENTS
Objectives
Introduction

7.1 Types of Loans
7.1.1 Term Loans (Outright Loans)
7.1.2 Cash Credit (CC)
7.1.3 Overdraft Facilities (O/D)
7.1.4 Discounting of Bills of Exchange (B/E)

7.2 Classification of Loans on the Basis of Activity
7.2.1 Priority Sector Lending (Directed Credit)
7.2.2 Commercial Lending
7.3 Classification of Loans – Purpose-wise
7.4 Principles of Good Lending
7.4.1 Safety

7.4.2 Liquidity
7.4.3 Diversification of Risks
7.4.4 Profitability
7.4.5 Purpose

7.5 Loan Procedure followed by Banks
7.6 Evaluating Consumer and Commercial Loans
7.6.1 Evaluating Consumer Loans
7.6.2 Evaluating Commercial Loans
7.7 Nature and Characteristics of Loans Granted by Commercial Banks
7.7.1 Characteristics of Commercial Bank Loans

7.8 Factors Influencing Loan Policy in a Bank
7.9 Summary
7.10 Keywords
7.11 Review Questions
7.12 Further Readings

Objectives

After studying this unit, you will be able to:
Classify loans on several basis
Explain principles of good lending

96 LOVELY PROFESSIONAL UNIVERSITY