Explain, why the banks do not lend credit to certain borrowers ?

 

Answer:

Points to Remember

  • Lack of collateral
  • Lack of proper documentation
  • Loan defaulters
  • High-risk businesses

Answer to be written

  • Banks do not give loans to those borrowers who lack collateral because it acts as a guarantee for the banks and they can sell it if the borrower fails to repay the loan.
  • Banks do not tend to lend loans to those borrowers who are not able to show proper documentation proof like their salary or collateral documents .
  • Banks also don’t lend more credit to those who haven’t paid their previous loans or are already defaulters .
  • Banks do not tend to lend loans to those borrowers who will invest the loan in high-risk businesses .

(Any three points)

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Davneet Singh

Davneet Singh has done his B.Tech from Indian Institute of Technology, Kanpur. He has been teaching from the past 14 years. He provides courses for Maths, Science, Social Science, Physics, Chemistry, Computer Science at Teachoo.