This topic lending procedures
and loan recovery in banks was tailored described.
The piece of work looked into
bank services and the rules that guide their monetary policies.
Research was carried out on
ways of improving bank lending policies and good measures on how money could be
Recommendation for further
improvement on these policies was described.
It vividly described procedure
for taking securities for bank lending to these in the financial industry, this
piece of work could serve as a reference manual to them.
The manual can also educate
people on the roles of banking in economic development of Nigeria.
TABLE OF CONTENT
Statement of the problem and purpose of the study
Rationale of the study
Significance of the study
Definition of terms
Principle of lending
Factors to be considered before granting loan to customer
Procedure for obtaining bank loan
Procedure for taking security for bank lending
Non – cash securities
Securities acceptable for bank lending
How bad debt could be recovered
Causes of bad debt
Design of methodology
Sources of data
Location of data
Limitation of the study
Method of data collection and analysis
Data presentation, data
analysis and discussion of the result
Discussion of the result
Summary, conclusion and
OF THE PROBLEM AND PURPOSE OF THE STUDY
The problem of this study is to
appraise the lending procedure and loan recovery in banks and their policies
with a view of finding the roles of banking in general economic development and
characteristic of a good policy and procedure for taking securities for bank
lending. It is believed that most loan defaulted goes bad because of the
inadequacy of lending procedures and polices in bank. Since it affect their
cash flow and impairs their profit ability.
Purpose of the study
The main objective of this
study is to known the procedures in lending loans in bank and the securities
for bank lending.
Bad debt recovery
When every effort to recover a
debt has proved unsuccessful, recovery processes could be done using any of
Realize the securities
Where the bank is in possible
of duly perfected securities which could fetch some money, the bankers night
could be enforced. The type of security held will determine the approach to
adopt in realizing them. This point under scores the importance attached to
realizable securities under the cannons of lending as stated earlier in chapter
four. If it is discovered at this critical point that the securities cannot be
realized due to defect in perfections, the bank would sadly have lost on purely
a Debt Collector
Where the amount involved is
smaller or tangible securities held, banks will normally pass the recovery of
such dept to licensed debt collectors. A fixed percentage of the recovered
amount is usually paid to the debt collector and expenses in cuffed in the
course of undertaking such a recovery exercise will be reimbursed upon
substantiated claims. Ti is advisable to draw up deed of appointment
incorporating the terms and conditions of the contract prior to it’s
commencement, so as to avoid misunderstanding.
In the extreme cases, the bank
may be forced to take legal action in order to recover debts owed to it by the
debtors. This is done as a last resort because it is cumbersome, time consuming
and expensive and because it represent s a sad way to terminate what probably
was an interesting banker-customer relationship. However, at this stage, the
entire relationship will get to the much without sentiments attached. Court
proceedings may not always be in the banks favour due to a number of reasons of
Inadequate knowledge of banking procedures
Poor banking knowledge and habits
However, where the decision is
in the bank’s favour, the court decision
may in the case of
individual or sole proprietorship, result in bankrupting proceedings which are
detailed in the Bankrupting Decree 1979 or winding-up process as stipulated in
the companies Decree of 1968.
IMPACT OF BAD AND DOUBTFUL DEBTS
The incidence of bad and doubtful debt imposes cost on the bank, the customer
and the economy in general. Though bad debts could be completely eliminated,
but it could be reduced to manageable level in order to induce a healthy
banking environment and to retain public confidence.
It has been observed that if lending decisions are not handled with care, it
can turn out to be the most loss making activity of a bank. A lot of risk are
involved in lending. To guard against this, the bankers need to apply a lot of
caution. However, to be too cautions can mean a lot of missed opportunities for
profitable lending, while failure to apply enough can mean huge losses for the
bank in form if bad debts.
In view of the above mentioned points, three important questions often come to
the mind of a lending banker, and he must be satisfied that the answer to them
are positive before deciding on which step to take. These questions in
relations are in relation to the loan profitability, safety and soundness.
1.2 RATIONALE OF THE STUDY
The rationale of this study is
It helps to know how much that is required.
2) It helps to know how long the funds is
3) It also helps to know the sources of
4) It also helps to know the policies of
1.3 SIGNIFICANCE OF THE STUDY
The different between success and failure in the banking industry is in the
effective lending procedures of the banks loan and advance.
Efficient lending procedures is vital to investments on the technique of
lending and the methods of security such lending and the pi falls that await
the unaware banker. A study on its subject will therefore be a welcome addition
to the existing volume of banking literature.
Effective loan procedures recognizes that beyond the application of sound bank
principles whenever a loan is made, there is need for urgency in appreciating
the point when loan begins to look doubtful arriving at a decision as to the
appropriate action, and in taking that action. This will enable the banks to at
best obtain full repayment of loan.
Beside the bankers more than
ever before will appreciate an appraisal of their lending and control mechanism
now that they are expected toi lend under tight monetary conditions with
it negative effect on investment outcomes.
The economy as a whole will benefit from the study because if the level of bad
debt is reduced, bank will be left with movement to enable them make the expected
contribution to the development of the economy.
DEFINITION OF TERMS
Bad debt- There is loans that
the borrowers are unwilling or unable to reply due to one reason or the other.
Doubtful debt- There are debt
which cannot be recovered back again
TERMS AND CONDITIONS APPLY
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