Loan Function of Banks
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Transcript of Loan Function of Banks
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8/12/2019 Loan Function of Banks
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FUNCTIONS OF BANKS
What are banks again?
- Banks are entities engaged in the lending of funds
obtained in the form of deposits.
Basic Functions
1. Loan Function
2. Deposit FunctionOther er!ices Offered b" the Bank
LOAN FUNCTION
1. #redit $pplication
- Bank must ascertain the capabilit" of the credit
applicant%borro&er to fulfill all its commitments to the
bank.
'o&?
Bank ma" demand a statement of assets and liabilities(
income and e)penditures( and such other information to
enable the bank to properl" e!aluate the credit
application. *his includes the financial statements of theborro&er submitted to the B+, for ta)ation purposes.
- hould such statements be incorrect in an" material
detail( the bank ma" terminate the loan or credit
accommodation granted on the basis of such statements
and demand immediate repa"ment of the loan or the
liuidation of the loan.
- urpose of the Loan / must also be in the contract
bet&een the bank and the borro&er
Wh"?
a. *he loan &ill be granted onl" in the amounts and for
the periods of time essential for the effecti!e completion
of the operations to be financed.
b. +f the loan &ill be used for a purpose other than that
stated in the credit application( &ithout the bank0s
appro!al( the bank ma" terminate the loan and%or
demand immediate repa"ment of the balance.
ot&ithstanding the preceding sentence( the proceeds
of a loan or other credit accommodation ma" be utilied
b" the borro&er for a purpose3s4 other than that
originall" stated in the application and contract5
ro!ided( *hat such other purpose3s4 is%are amongthose for &hich the lending bank ma" grant loans and
other credit accommodations under e)isting la&s and
regulations5 ro!ided( further( *hat such utiliation shall
be &ith prior &ritten appro!al of dul" authoried
officer3s4% committee%board of directors of the lending
bank and such &ritten appro!al shall form part of the
contract bet&een the bank and the borro&er.
- *he 6onetar" Board must take into consideration the
peculiar characteristics of micro-financing in the
promulgation of rules and regulations regarding credit
applications.
Micro-financing - $ t"pe of banking ser!ice that is
pro!ided to unemplo"ed or lo&-income indi!iduals or
groups &ho &ould other&ise ha!e no other means of
gaining financial ser!ices.
- Loans and credit accommodations shall be granted in
accordance &ith safe and sound banking practices.
Joint and Solidary Signature JSS! "ractice
$ common banking practice reuiring as an additional
securit" for a loan granted to a corporation the 7oint and
olidar" signature of a ma7or stockholder or corporate
officer of the borro&ing corporation 3ecurit" Bank !s.
#uenca( 891 #,$ :;14.
,easons5
a. +n case of default( creditor0s recourse is not limited to
corporate properties but e)tends to personal assets ofthe suret"