University Of Dhaka Departm

Course Designation:Principle of
Banking.
entof
Course work on: loans and Banking
advances.
and
Insuranc
e

Thanks for companionship

INVITATION

Submitted By Toukir Mahmud.

Id no _50
Section A.

Submitted to Name: Md.Nazmul Hasan Assistant

Professor Time：
Dept.banking and insurance
University of Dhaka 2020.7.15
Dept.banking and insurance
University of Dhaka
Introduction
Loan
A loan is an amount borrowed for specific financial
needs like investing in assets, purchasing consumer
durables, constructing a building, making payments or
fulfilling financial obligations so that business processes
can run smoothly. A loan is offered in the form of a debt
by a lender or a financial institution with a
predetermined interest rate. The terms and conditions of
a loan are established in a contract form which includes
the interest rate and the repayment tenure.
Advance
An advance is generally given by an employer to the
employee for meeting short-term financial needs. An
advance is usually deducted from the employee’s
monthly salary. Advances are also provided by banks to
organizations or business owners for meeting their
capital requirements. Advances require that the
repayments are made within one year.
The principle Sound lending
Safety: Safety means that the borrower should be able to
repay the loan and interest in time at regular intervals
without default.
Liquidity: Liquidity means possibility of converting
loans into cash without loss of time and money.
Return or profitability: Bank Profitability. Like all
businesses, banks profit by earning more money than
what they pay in expenses.
Diversification: Diversification is the practice of
spreading your investments around so that your exposure
to any one type of asset is limited. This practice is
designed to help reduce the volatility of your portfolio
over time. One way to balance risk and reward in your
investment portfolio is to diversify your assets.
Object of loan: The loan purpose helps the lender
determine the level of risk. ... If the borrower has few
debts, good credit, and a substantial down payment, the
lender might determine this opportunity as low risk and
motivate the borrower.
National Interest: Even when an advance satisfies all the
aforesaid principles, it may still not be suitable.
Margin Money: In case of secured loans, the bank
should carefully examine and value the security.
National Interest
Lastly
Character of the Borrower.
Forms of Lending (Advances)
Banks lend for working capital requirements in the form
of:
1. Loans
2. Cash credit
3. Overdraft
4. Purchase and discounting of bills of exchange

Types of loan and advance:

 on the basis of object purpose
 On the basis of time
 On the basis of security
 On the basis form
Determining Creditworthiness: To identify that a
banker should keep in mind some important
information to examine the respective borrower
be for granting loans advance
 Character
 Ability of run the enterprise
 Adequate capital
 Soundness of the project

Sources of Credit Information:To know the correct

required worthiness for granting loan to the willing
borrower the following bellows play an important
role.

 The Borrower
 Credit information Bureau
 Exchange of credit Information
 Enquiries From Traders and Businessmen in the
same trade.
Those evaluation need to done by the Bank
commercially before granting loan and advance.A
prudent Banker should always seek and justify those
necessary in order to terminate all the risks.
It's over Here.

Thank you.