The major business of banking company is to grant loans and advances to traders as well as commercial and industrial institutes. The most important use of banks money is lending. Yet, there are risks in lending. While lending loans or advances the banks usually keep such securities and assets as a supports so that lending may be safe and secured. Suppose, any particular state is hit by disasters but the bank shall get advantages from the lending to another states units. Thus, the effect on the entire business of banking is reduced. So the banks follow certain principles to minimize the risk. Following are the important areas to be taken care while lending:
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