Answer to Question #160050 in Management for Prabhdeep

Question

3.differentiate between private banks and foreign commercial banks ? (please give at least 10 points for difference)

4.explain the various provisions of principle of lending ? (please give 5 to 6 points with elaboration ,for this)(related to bank management)

Answer 1

explain the various provisions of principle of lending ? (please give 5 to 6 points with elaboration ,for this)(related to bank management)

1.     Commercial banks’ customer base is wider than that of private banks who serve a select clientele.

2.     Commercial banks are operated by corporate holding companies which may own one or more banks while their private counterparts protects their clients’ assets themselves.

3.     Private banks do not provide pension to their workers while some commercial banks provide pension depending on the sector one is working at.

4.     Job security in private banks is solely dependent on performance while in commercial bank its determined by performance and the profitability of the bank

5.     Commercial banks generate their money by providing loans to people whereby they earn interest in return while private banks provide financial services to wealthy individuals owning huge amounts of assets.

6.     While commercial banks provide loans to businesses of all sizes, private banks offer loans to private banking clients only.

7.     Commercial banks mainly focus on providing credit facilities, investments and other financial needs while private banks only benefit their individuals and families.

8.     Commercial banks play a vital role in the growth of the world’s economy while private banks operate in their respective countries only.

9.     Commercial banks collects bills of exchange and cheques on behalf of their clients by use of clearing house facilities while private bank customers work on trust.

10. Commercial banks approaches central bank to re-discount bills while central banks are not legible to the same service.

Question 2: Explain the various provisions of principle of lending

1.      Liquidity -Banks offer loans for short periods only because it’s normally public money which can be withdrawn by the depositor at any time. Loans are given in exchange of securities that can easily be converted to cash

2.      Safety- the borrower should be in a position to repay the loan on time and at regular intervals.

3.      Diversity- A bank should invest its surplus in different types of securities as a way of spreading risk. Loans should be advanced to varying types of businesses, firms, industries, and trades.

4.      Stability- banks should invest in those stocks and securities which are relatively stable in their prices to avoid making losses.

5.      Profitability- banks should invest in securities that they are almost sure will earn them good profits. They should avoid investing in the shares of new companies since they are not safe.