Operational Aspects of Loan Accounts | PAPER II – PRINCIPLES & PRACTICES OF BANKING | MODULE B: FUNCTIONS OF BANKS
Operational Aspects of Loans and Credit Management Operational Aspects of Loans and Credit Management 1. Operational Aspects of Loan Accounts Loan accounts involve the administration of credit given to borrowers. This includes disbursement, interest application, repayment tracking, and delinquency management. Example: If a customer takes a loan of ₹5,00,000, the bank maintains a loan account to monitor the disbursement and repayments. 2. Interest Rates on Loans Interest rates may be fixed or floating and are often linked to benchmarks like MCLR, Repo Rate, or external benchmarks. Mathematical Illustration: Loan Amount = ₹1,00,000 Interest Rate = 10% p.a. Time = 1 year Interest = (1,00,000 × 10 × 1) / 100 = ₹10,000 3. Credit Management Credit management involves assessing borrower creditworthiness, setting limits, and ensuring repayment capacity. 4. Credit Monitoring Cre...