BANKING GENERAL KNOWLEDGE
Question
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Guidelines that should be followed to make sure the bank is making good loans is called:
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Portfolio Mix
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Risk Diversification
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Loan Policies
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Explanation:
Detailed explanation-1: -A loan policy is a bank’s lending guidelines that set the terms on how and to whom it will loan funds. A financial institution develops its own policy, which should also be in compliance with all applicable regulations.
Detailed explanation-2: -With effect from October 18, 1994, RBI has deregulated the interest rates on advances above Rs. 2 lakh and the rates of interest on such advances are determined by the banks themselves subject to BPLR and Spread guidelines. For credit limits up to Rs. 2 lakh, banks should charge interest not exceeding their BPLR.
Detailed explanation-3: -Elements of loan structure include loan-to-value (LTV), interest rate, amortization period, and collateral security requirements.
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