describe briefly the loan from commercial bank
Answers
A loan is a credit facility provided by the commercial banks to any and all account holders including fixed deposit account holders, savings deposit account holders, and even current account holders. If someone wishes to borrow large sum of money, payable in monthly installments along with interest - they go for this option of borrowing money through loans by commercial banks. The rate of interest on these loans is relatively high. The rate is determined based on the Bank Rate.
Bank Rate is the rate at which central bank lends money to the commercial banks in cases of insufficient funding, if the banks have to pay more interest - they will recover it from the people who have taken / will be taking loans by charging them higher rates of interest on the loans. If the rate is lesser than the current loan interest rate, they will not necessarily decrease the rate but they can do so, otherwise they may keep the rate same.
Giving a loan is not an easy task for a banking institution, they need to ensure the person they are giving loan has enough securities to make up for the amount of loan if he fails to pay the installments as well as a person needs a sufficient amount of credit standing capacity to be deemed fit to take loans. Banks give loans through deposits, our money is what goes into loans and bank earns interest on our amount through which they earn profit. Hence we also say, every deposit makes up a loan.
Answer:
commercial bank is to give loans and advances particularly to businessmen and entrepreneurs and thereby earn interest. This is, in fact, the main source of income of the bank. A bank keeps a certain portion of the deposits with itself as reserve and gives (lends) the balance to the borrowers as loans and advances in the form of cash credit, demand loans, short-run loans, overdraft