Execution Process of Consumer Credit Scheme

Abstract

There are cardinals principles of consumer credit lending that have been followed by the local and foreign commercial banks since long. These are the principles of safety, liquidity and profitability. The first and foremost principle of lending is to ensure the safety of the funds along with interest, according to the terms of loan contract. Secondly, banks are lending funds for short periods and mainly for less risk of capital. Banks always want to liquidate their capital as early as possible due to risk. Finally, commercial banks are profit earning institutions that is why, banks always looks greater profit in their consumer credit scheme (Sundharam, 1995). There are some others principles in lending consumer credit to the customers such as purpose of loan, diversification of risk, following the national policy and less risk financing.