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    Lending Cs

    Uploaded by

    sandggreatstarnigltd

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Lending Cs

    Uploaded by

    sandggreatstarnigltd
    13 views2 pages

    Original Title

    lending cs

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    © © All Rights Reserved

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    Copyright:

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    Download as docx, pdf, or txt
    13 views2 pages

    Lending Cs

    Uploaded by

    sandggreatstarnigltd

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    i. Character: This is the attitude, belief and behaviour of the customer.

    It shows how the customer handled financial obligations over a period

    of time as may be seen in the bank’s record. A customer that willingly

    repay his facility as at when due is considered to be of good character

    more than a rich customer that the bank will resort to litigation before

    facility can be recovered. A good banker should be able to judge a

    customer’s willingness to repay facility before such customer can be

    considered for a loan.

    ii. Capital: Capital refers to the customer’s stake of the business. It is the

    amount the customer has invested in the business in the form of equity

    or asset less liability. Capital could also be the amount that the

    individual contributes towards a project which requires the bank’s

    funds for the project to be totally financed. Customers should not be

    under the illusion that when a project or contract is secured, their bank

    will bear the full financial requirements of the project or contract.

    Customer’s financial contribution provides an added incentive not to

    default on the loan.

    iii. Capacity: Capacity is the measurement of the customers’ ability to

    repay the bank loan. The track records of the customer are very

    important toa lending bank. Previous track records will determine if

    the customer has the capacity, morale, technical and management

    ability to execute the project to which the facility is being sought.


    iv. Condition: This refers to the prevailing economic and business

    conditions that can adversely affect the capacity of the customer to

    continue in business and/or repay the loan. Economic condition plays a

    prominent role in loan consideration by banks.

    v. Collateral: This is an asset that is pledged by the borrower to the

    bank/lender as security for a loan. In the event of a default in repayment

    of the loan, the bank can convert the collateral to cash towards the loan

    repayment. Security is normally required by bankas an insurance against

    unknown events, which may render an hitherto performing facility

    account bad and irrecoverable. Usually, the value of the security must be

    over and above the facility to cover the interest and other charges.

    1.1 Banker-Customer Relationship

    1.3.1 What is a Bank?


    The above question appears quite simple, even to a lay man but it has dominated

    legal and commercial minds for quite a period of time. It is very difficult to

    precisely define a bank judging from different types of operations being carried

    out. A definition will not be sufficient to embrace the diverse activities carried on

    by all types of banks.

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