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)
