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When Friendly relationship Agency Greater Than Money

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Aug
26

Equally necessary is the principle of ‘profitability’ in financial institution advance like other business institutions, banks should make earnings. Banks discourage advances for hoarding stocks or for speculative activities. If the bank has quite a few branches unfold over the country, it gets a large assortment of securities towards the advances. Another important principle of fine lending is the diversification of advances. It’s after considering all these elements that a bank decides upon its lending rate. The banker ensures that the cash superior by him goes to the proper sort of borrower and is utilized in such a way that it is not going to only be safe on the time of lending but will stay so throughout, and after serving a useful purpose within the commerce or industry where it’s employed, is repaid with curiosity. The mortgage is safe however not liquid. Directed Investment Programme : The committee objected to the system of maintaining excessive liquid belongings by commercial banks within the type of money, gold and unencumbered government securities. Such banks are normally discovered solely in advanced countries like U.S.A. The Federal / Central Bank (e.g Reserve Bank of India, RBI) might have issued a directive prohibiting banks to allow the actual type of advance.

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