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Principles of Bank Lending

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Bank lending is aimed at alleviating financial problems of borrowers whether individuals or corporate bodies. In essence, bank lending helps to induce economic growth and development. It creates employment opportunities, increase general income level, stimulates economic activities and on the whole, ensures the going concern concept of a bank if the lending process is appropriately administered. It is important for the lending banker to show deep interest on the borrowers' economic and social activities. The lending process considers many factors which are called the Ps of credit analysis before taking a final decision on whether to lend or not. These Ps are: People: A lending banker should assess the integrity, qualifications, and experience of the people representing their corporate entities or on their behalf. The essence of doing this, is to ensure that any loan granted would be repaid as at when due. This is because a borrower could be in a position to repa...
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Bank Marketing

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Bank marketing is the marketing of bank services. This bank services are financial services ranging from simple collection of deposits to complex services such as export financing, loan syndication, capital market activities and insurance services. Thus the term bank marketing can be used interchangeable with marketing of financial services. Bank marketing involves Double-sided marketing. Double-sided marketing means a bank must first engage in marketing to buy its raw materials (deposits) and engage in marketing again to sell it other services (such as loans and other investments) A banker has to attract customers to sell deposits to him and also has to attract them to buy loans and advances from him. This means a bank buys from its customers and at the same time sells to its customers. What the banker buys is regarded as bank product (such as deposits) and at the same time what the bank sell is regarded as its own products (loans and advances) Deposits could be sourced by...
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Liquidity Management For Banks

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A bank is considered to be liquid if it has ready access to immediate spendable funds at reasonable cost at precisely the time those funds are needed. A liquid bank is one that has the right amount of spendable funds at hand when it is required or can raise liquid funds by buying or selling assets back of adequate liquidity. When a bank fails to meet up the demand for spendable funds, it is a first sign that the bank is in trouble. The bank begins to loose deposits from customers and has to borrow funds at a higher rate or dispose of more liquid asset. The reason why banks especially commercial bank have liquidity problem is because they accept large amount of short term deposits from their customers either individuals or businesses and then turn round and give out medium or long term credit to their customers. Theories of Liquidity Management Banks can choose to manage their liquidity by adopting any of these theories. Commercial loan theory : Under this t...
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About Banking and Finance

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Banking and Finance is a field that deals with the study of financial services that include lending money, collection of deposits, issue of currencies and debit cards, transaction processing, and the study of investments. It includes the dynamics of assets and liabilities over time under conditions of different degrees of uncertainty and risk. Banking refers to that process in which a bank which is a commercial or government institution offers financial services that include lending money, collection of deposits, issue of currencies and debit cards, and transaction processing etc. Finance is a field that deals with the study of investments. It includes the dynamics of assets and liabilities over time under conditions of different degree of uncertainty and risk. Finance can also be defined as the science of money management. Finance aims to price assets based on their risk level and their expected rate of return. Scope of Banking and Finance Banking and Finance combines the...
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