Providing loans. What is a loan
2. 3. Providing a loan
A loan can be viewed as the provision of goods and money on a repayable basis. Similarly in meaning, another definition is the provision of money or goods on credit for a certain period on the terms of compensation and repayment. It can be assumed that a loan is a loan in cash or commodity form on the terms of repayment and usually with the payment of interest, expressing the economic relations between the creditor and the debtor. A loan is also defined as money or property provided by one party (creditor) to the other party (borrower) in the amount and on the terms stipulated by the agreement. According to another definition [< лат. definitio определение] кредит – это денежные средства или другие вещи, определенные родовыми признаками передаваемые (либо предназначенные к передаче) в процессе кредитования в собственность другой стороне, в результате чего между сторонами возникают кредитные отношения .
Russian banks they have always been accused of being isolated from the real economy, that they are reluctant to lend to production, and even more so to small and medium-sized businesses. Today, most of them are still in no hurry to increase their loan portfolios. Some do not have enough experience for this, others are afraid of loan default due to insufficient collateral. The provision of loans is one of the varieties of monetary transactions considered in this essay.
Until recently, a specific feature of Russian commercial banks was that they received the predominant share of their income not through lending to the real sector of the economy, as is the case in efficiently functioning economies, but as a result of operations in the financial sector: speculation in the foreign exchange market, state valuable papers etc. However, an effective banking system must successfully fulfill its main function - to transform the savings of the population into productive investments. Here we touch on only one part of this type of monetary transactions - credit investments in the economy. All in all, there are much more different relations arising from the phenomenon of granting loans. Banks provide such types of services to both individuals and legal entities. And in the present, this field of activity banking system is developing successfully in our country.
The lending process (credit process) includes the programming, provision, use and repayment of bank loans. In order to lend effectively, banks select customers on the basis of financial condition, liquidity and solvency. The right to conduct credit and settlement operations was granted to commercial banks officially registered in central bank Russia. Opening of loan accounts for clients is carried out upon submission of a package of documents. It is possible to open such accounts in different banks. In accordance with the established practice, each loan is issued with a package of standard documents that characterize the purpose, size and terms of the loan, as well as the creditworthiness of the client. The main document regulating the credit relationship of the borrower with the bank is a loan agreement. The most important document of such relations is also an urgent obligation. This document entitles the bank to make an indisputable transfer of the corresponding amount Money on the day the payment is due. An important condition for granting a loan to enterprises is the guarantee of a third party.
The loan is not only repayable, but also paid. The payment of the loan is realized through the establishment of interest. The percentage in this case is economic attitude about making fixed amount money for the loan. Credit and interest have a regulating effect on the circulation of capital. When we are talking on lending to enterprises, it takes into account the fact that all sectors of the national economy are characterized by a different speed of circulation individual capitals. With the function of money as a means of payment, where money acts as an obligation that must be repaid after a specified period of time with real money, the emergence of credit money. They have gone through the following development path: a bill of exchange, an accepted bill, a banknote, a check, electronic money, credit cards.
It can be noted that, according to, there comes responsibility for obtaining individual entrepreneur or the head of the organization of the loan or preferential terms of lending by presenting to the bank or other creditor knowingly false information about the economic situation or financial condition if the act caused major damage. The same article regulates liability for slightly different elements of crimes related to credit relations - illegal receipt of state target loan, as well as its use not for its intended purpose, if these acts caused major damage to citizens, organizations or the state. There is a close connection.
The issuance of loans (credits) under various collateral is one of the main functions of banks. Cash transactions, associated with the issuance of loans, are diverse and complex, they are a kind of reverse side of the placement of deposits and form part of the circulation of capital.
The main activity of commercial banks in terms of generating income is the provision of loans to borrowers. Loans related to credit operations are the most important part of banking assets, and income from lending activities- the largest component of bank profits.
Currently, in domestic lending, approaches to organizing credit relations between a lender and a borrower have been fundamentally changed: a transition is being made from object-based lending to lending to an entity as a whole, a specific legal entity or individual, lending to complex targeted economic and social programs, unified lending to borrowers, regardless of industry affiliation and form of ownership.
In addition to lending on terms of urgency, repayment, payment and security, regulation of relations between the lender and the borrower through loan agreement the main and most important point of commercial banks is the provision of loans to reliable customers, which eliminate the risk of loan default and ensure the timely repayment of the requested loan at the expense of their income or in other ways with the payment established by the agreement interest rate for a loan. Thus, based on a number of reasons and conditions, a commercial bank, when providing urgent loans to a borrower, gives preference to those clients who are considered reliable in all respects. The credit process is the process of organizing the bank's credit activities, consisting of successive stages, the content of which is determined credit policy jar.
The main goal of the credit process is to minimize (ideally avoid) possible losses from non-fulfillment by customers of their obligations under the loan agreement.
The lending process can be divided into several stages, each of which contributes to quality characteristics loan and determines the degree of its reliability and profitability for the bank:
- 1. consideration of an application for a loan and an interview with a future borrower;
- 2. assessment of the client's creditworthiness and determination of the risk on the loan;
- 3. preparation and execution of a loan agreement;
- 4. issuance of a loan;
- 5. control over the fulfillment of the terms of the contract and the repayment of the loan.
Any credit transaction begins with the consideration of the application or petition of the borrower received by the bank. These documents contain basic information about the borrower and the requested loan: purpose, size, type, term, possible security. In accordance with the requirements of the bank, the application is accompanied by Required documents depending on the nature of the credit transaction. Different packages of documents can be developed for different groups of clients. An approximate package of documents may include: copies of constituent documents, charters, regulations, lease agreements, registration certificates or patents; documents certifying the right to use land plot notarized; documents confirming the eligibility of the client in obtaining a loan; feasibility study of the financed event with the calculation of the expected proceeds from the sale of products (works, services); copies of contracts, agreements and other documents related to the credited event, at the expense of proceeds from the implementation of which it is supposed to repay the requested loan; annual and quarterly accounting and statistical profit and loss reports, income statements, statements of accounts opened with another bank, and other obligations to ensure the timely repayment of the loan.
The bank may require from the borrower other documents and information confirming the security of the loan repayment, as well as the solvency of the borrower and the guarantor (guarantor). At the same time, for borrowers who have permanent credit relations with a specific commercial bank the list of documents to be submitted may be shortened.
When a borrower applies to a bank for a loan, for a preliminary assessment of the possibility of lending, the so-called borrower's registration card can be used, which contains the following data: last name, first name, patronymic of the head of the company or representative of the borrower; types of activity and property; legal address of the client; the name and details of the bank where settlement and currency accounts are opened; main founders; the purpose and amount of the loan; the period for which it is requested; forms of loan security; the main positions of the balance sheet structure for the last reporting date and other indicators.
The lending process is associated with the action of numerous and diverse risk factors that can lead to non-repayment of the loan within the stipulated period. Therefore, before drawing up the loan conditions and concluding a loan agreement, the bank, after receiving the application and the necessary documents, must carefully study the factors that may lead to non-repayment of loans, i.e. assess the borrower's creditworthiness.
After the commercial bank has considered the application of a potential borrower, demanded and received the necessary documents from him, analyzed the financial statements for the creditworthiness and insolvency of the future client, made sure of a high-class reputation, etc., the bank decides to conclude a loan agreement and those conditions under which it will be issued and returned. At the same time, the reliability of the loan agreement is the higher, the better the basic conditions for the lending procedure are worked out and defined: urgency, payment, repayment and security.
A loan agreement is a written agreement between a commercial bank and a borrower, according to which the bank or other credit organization (creditor) undertakes to provide funds (credit) to the borrower in the amount and on the terms stipulated by the agreement, and the borrower undertakes to return the amount of money received and pay interest for her . Loan agreement relations are established Civil Code RF, according to which its specificity and differences from the usual loan agreement concluded between any legal entities and individuals are as follows: - the creditor bank provides a loan to the borrower only in cash; - the loan is issued only at interest, the amount of which is established by the loan agreement;
The loan agreement must be concluded in writing, non-observance of which makes it invalid and such an agreement is considered void.
The loan agreement includes the following main sections:
- 1. Preamble. It usually contains the names of the contracting parties and a description of the purpose of the loan.
- 2. The volume and terms of repayment of the loan. This section indicates the amount of the loan, the procedure for obtaining it, the loan interest, the term of the loan and the terms of its repayment.
Domestic commercial banks loans are issued in the following order.
Loans are issued by the credit department for specific repayment periods by order orders. In the event of a change in the conditions for the production and sale of products (carrying out works and rendering services) caused by objective reasons, the bank can satisfy the additional need of the borrower for a loan that has arisen in connection with this within the limits of available credit resources on the terms specified in the supplementary agreement. If, when lending to large target programs and objects, the creditor bank cannot satisfy loan application the borrower entirely due to the insufficiency loan funds, and the refusal of a loan will jeopardize the activities planned by him or shake the reputation of the creditor bank, then the bank may issue a loan jointly with other commercial banks on the basis of a joint lending agreement.
Interest on the loan is determined in such a way that the amount of interest received from the borrower covers the bank's expenses for raising funds necessary to provide the requested loan, with the addition of the so-called margin.
The amount of interest also depends on the period of use of the loan, the risk of insolvency of the borrower, the nature of the loan security, the content of the credited event, the rates of competing banks and other factors.
Interest rates for a loan can be fixed (fixed) and floating, which is also stipulated in the loan agreement. On the date established by the agreement (the date of payment of interest) on the placed funds and / or repayment (repayment) of the principal debt on them, the accounting officer responsible for maintaining the account of the borrower client, in accordance with the order signed by an authorized official of the bank, either executes accounting entries the fact of payment of interest on placed funds and / or repayment of the principal debt on them, or in case of non-fulfillment (improper performance) by the borrower client of its obligations under the agreement, transfers the debt on accrued but not paid (overdue) interest and / or on the principal debt on placed funds to the relevant accounts for accounting for overdue principal debt and/or overdue interest. Debt on the provided (placed) funds (uncollectible and / or recognized as unrealistic for collection in established by the Bank Russian order) is debited from the balance sheet of the creditor bank at the expense of the created reserve for possible losses on loans, and in case of its deficiency, it is attributed to the losses of the reporting year. The write-off of the outstanding debt on the provided (placed) funds, including interest, from the balance sheet of the creditor bank is not its cancellation, it is reflected in the balance sheet for at least five years from the date of its write-off to monitor the possibility of its collection. In accordance with Art. 34 FZ "On banks and banking» The creditor bank is obliged to take all measures provided for by law to collect the debt (including from the debtor's client-borrower). Credit organisation entitled to apply to court of Arbitration with an application to initiate insolvency (bankruptcy) proceedings against debtors who do not fulfill their obligations to repay debts, in accordance with the established federal laws okay.
- 3. Report and guarantee. In this section of the agreement, the borrowing enterprise discloses the state of its affairs and vouches that financial reports, which form the basis for obtaining a loan, correspond to reality and accurately reflect the situation of the borrower. This clause of the loan agreement certifies that the borrower:
- F is duly registered and in good standing;
- F is empowered to conclude a loan agreement and fulfill its obligations to the creditor bank;
- F has property that is not subject to retention and is free from any obligations, except for those stipulated in the loan agreement;
- F is not involved in any legal actions or claims, other than those to be determined by the contract;
- F has trademarks, company name, seal, current account for conducting financial and production affairs;
- F fulfilling contractual obligations under this loan, does not violate other obligations, does not suffer economic losses from the time of the audit and submission of financial statements;
- F has a total tax debt that does not exceed the amount shown on the balance sheet.
Until finalization and payment sums of money for a loan, the draft agreement and its terms, confirmed by relevant documents, must have a lawyer's opinion.
If the agreement provides for a revolving loan, the borrower is obliged to send a document to the bank before each disbursement of the loan, confirming that the previous reports and guarantees remain in force.
4. Description of the security. Bank loans may be secured by real estate and movable property, including government and other securities, bank guarantees and other methods provided for by federal laws or an agreement. If a loan is provided against a certain type of security, this clause of the loan agreement contains it detailed description, supporting documents and indicates the procedure for its handling and use in appropriate situations. If the borrower fails to fulfill the obligations stipulated by the loan agreement to ensure the return of the loan amount, as well as in case of loss of security or deterioration of its conditions due to circumstances for which the creditor bank is not responsible, the creditor bank has the right to demand from the borrower early return the amount of the loan and the payment of interest due, unless otherwise provided by the agreement. In some cases, commercial banks may enter into an agreement with the borrower to provide a loan without collateral. Such a loan is usually issued to financially stable clients who have a reputation as a reliable payer and are considered by the lending bank as a first-class borrower. 5. The binding terms of the loan agreement impose certain obligations on the management of the borrowing enterprise. One of the most common conditions is the provision by the borrower at intervals established by the contract of financial reports, as well as other information requested by the bank.
In some cases, the loan agreement may oblige the borrower to maintain working capital above the stipulated level in order to have a stable level of solvency for the period of using the loan. Banks in Western countries sometimes include in an agreement on a term loan the borrower's obligation to support the management of the company, which satisfies the creditor bank. This is an important condition, since its success depends on the management of the company. In addition, banks often demand insurance from the borrower's leading administrators of the firm, which is difficult to find a replacement.
6. Forbidding conditions. This section contains a list of actions that the borrower undertakes not to take during the entire period of using the loan without prior approval from the lender bank. The purpose of these conditions is to prevent the dispersion of capital and financially weaken the borrower.
A typical prohibition clause is the borrower's obligation not to pledge its assets as collateral for loans from other lenders.
In the practice of foreign banks, the agreement includes conditions that prohibit the borrower from merging and consolidating with other companies without the permission of the bank, selling or leasing assets, and issuing loans. Nor can he act as a guarantor, endorser or guarantor. Such a ban reduces the likelihood of financial difficulties for the borrower and increases the reliability of loan repayment and interest.
- 7. Limiting conditions - the terms of the agreement, according to which the bank sets restrictions on the actions of the borrower. For example, in order to be sure of the stability of the financial position of the borrower, the lending bank limits the amount of dividends, wages, bonuses and advances paid to employees of the borrowing enterprise. The purpose of the restrictions is to encourage (if not force) the borrower to rely less on borrowed funds and increase your capital. To prevent a weakening of the financial position of the borrower, the bank may also limit the amount of funds that can be invested in fixed assets, such as industrial buildings and equipment, or funds allocated by the borrower to purchase its own shares and other securities.
- 8. Terms of the loan agreement - the conditions under which the loan agreement should be considered violated. Such conditions include: non-payment to the creditor bank of the main part of the debt or loan interest to due date, inclusion by the borrower of false information in financial reports, etc.
In addition to the above sections, the loan agreement also contains sections "Responsibility of the parties", "Term of the agreement", "Additional conditions". At the end of the contract, legal addresses and payment details of the parties.
The bank provides loans to customers in the following forms.
- 1. Providing one-time loans. Such a loan is issued to cover a certain target funding requirement, and the issue of its provision is decided every individually. Issuance of a one-time loan is carried out by crediting funds to the current account of the borrower or, if he is an individual, by issuing cash.
- 2. When opening a credit line, loans are provided within a predetermined limit, which is used by the borrower as necessary to pay for a certain period of payment documents presented to him. The credit line is opened to clients with stable financial position and good reputation. Opening a credit line allows you to pay at the expense of a loan any settlement and monetary documents provided for in loan agreement concluded between the client and the bank. A credit line is usually opened for a period of one year, but may also be opened for a shorter period.
During the term, the client can at any time receive a loan without negotiating with the bank and any additional processing and approval. At the request of the client, the credit limit can be revised. There are revolving and non-revolving lines of credit. In the case of a non-revolving line of credit total amount of all loans received should not exceed the established limit, and after the repayment of the loan, the relationship between the bank and the client under this loan agreement ends. With a revolving credit line (revolving), the loan is provided and repaid within the established debt limit, i.e. when the loan is repaid, the limit is renewed. The client has the right to use the loan again before the expiration of the contract. A revolving line of credit is sometimes also referred to as an "open line of credit". A credit line can also be a target (framework) if it is opened by a bank to a client to pay for a number of deliveries.
- 3. Bank lending to the client's current account ("overdraft").
- 4. In other ways that do not contradict the law.
The provision (placement) of funds by the bank is carried out in the following order:
- - legal entities- only in a cashless manner by crediting funds to a settlement, current or correspondent account, including when providing funds for payment of payment documents and for the payment of wages;
- - individuals- in a cashless manner by crediting funds to an individual's bank account or in cash through the bank's cash desk;
- - provision of funds foreign currency legal entities and individuals is carried out by authorized banks in a cashless manner.
To carry out operations for the issuance and repayment of a loan, institutions of commercial banks open loan accounts for borrowers, the forms of which are determined by the method of lending. The classification of loan accounts is very ramified and somewhat follows the classification of types of accounts. The lending method determines the form, type of loan account used to issue and repay a loan, depending on the needs of the client and the interests of the bank. In each specific case, the client can open:
- - ordinary (simple) loan accounts;
- - special loan account;
- - checking account (settlement and loan) account.
Consider the features of each type of loan account.
Ordinary (simple) loan accounts are used in banking practice mainly for issuing one-time loans. The repayment of debts on these accounts is carried out within the terms agreed with the borrower on the basis of urgent obligations-orders. An enterprise can open several simple loan accounts at once if it simultaneously uses a loan for several objects and, therefore, loans are issued on different conditions, for different periods and at different interest rates. This separate accounting for loans is important for the implementation bank control for their timely repayment.
A special loan account is opened, as a rule, for borrowers who have a constant need for a bank loan, when a large part of the client's payment turnover is mediated by the loan. The specificity of issuing loans on this account is that the issuance of loans each time is not documented, but is made on the basis of an application-obligation, which is provided to the bank by the borrower.
When opening a special loan account, loans are issued as needed by paying for settlement documents, and they are repaid by paying the proceeds directly to a special loan account, bypassing the settlement account. The current account plays the role of an auxiliary account here, because. a limited range of operations is performed on it, mainly related to the distribution of profits and the payment of wages. To do this, the planned share of intangible costs and profits contained in the proceeds is periodically transferred from the special settlement account of the client to the client's current account. Only one special loan account can be opened for a client in a bank, through which loans are issued for many objects. But this does not exclude the possibility of opening simple loan accounts for him in parallel, if the bank deems it necessary to lend to the enterprise separately for some operations.
By using a single settlement and loan (active-passive) account, called in banking practice a checking account, lending takes place to first-class paying and creditworthy borrowers. This account is the highest form of bank's trust to the client. The debit of this account includes all payments of the client related to its productive activities and the distribution of profits, and the proceeds and all other receipts in favor of the enterprise are credited. The credit balance of the account indicates that the company has in circulation at the moment own funds, and the debit balance - about attracting a bank loan into circulation, for which interest is charged. A checking account does not preclude the client from obtaining other types of bank loans (mainly medium and long-term) from simple loan accounts, but are credited either to the credit of the checking account or sent directly to pay suppliers' bills. The basis for opening a checking account is the conclusion of an agreement with a client on the provision of a checking loan.
An enterprise can open several loan accounts at once, since loans can be issued on different terms, for different periods and at different interest rates. Such accounting of loans allows the bank to control their timely repayment.
In order to cover possible losses associated with non-repayment of received funds by borrowers, creditor banks are required to create reserves for possible losses on loans, which, depending on the degree of risk of the latter, can reach 100% of their amount.
Obviously, such a diversion of funds from circulation is unprofitable for the bank and should lead to an increase in interest on loans, especially risky ones.
Although translated from Latin "credit" means "trust", nevertheless, the lending process is one of the risky active operations that, if not reasonably approached, can lead to loss of liquidity and bankruptcy. The credit process is the reception and methods of implementing credit relations, arranged in a certain sequence and accepted by this bank. Through the process of short-term and long-term lending, the function of redistributing funds in financial system country.
The lending process is complicated procedure, consisting of several complementary stages, the neglect of each of which is fraught with serious errors and miscalculations.
The first stage of the lending process is programming. It consists in assessing the macroeconomic situation in the country as a whole, the region of work potential borrowers in particular, analysis of sectoral dynamics of selected areas of lending, verification of the readiness of the staff of the creditor bank to work with various categories of borrowers, adoption of a number of internal banking regulations. Based on the studies carried out, the bank's management (usually the bank's board) adopts a credit policy memorandum for a specific period (usually a year). This document sets out:
- 1) the main directions of the bank's credit work for the coming period, specific indicators of credit activity (norms and limits) that provide the necessary level of profitability and protection from credit risks, for example, ratios of loans and deposits, ratios equity and assets, client assets, etc.;
- 2) the next intrabank normative document on credit work is the Regulation on the procedure for issuing loans, which reflects:
- - organization of the credit process;
- - a list of required documents from the borrower and standards for the preparation of draft loan agreements;
- - rules for valuation of collateral.
Only after the adoption of these documents regulating the lending process, we can talk about the internal readiness of the bank for the second main stage of lending.
The second stage of lending is the direct provision of a bank loan. In accordance with the selection guidelines developed and adopted by each bank, employees (inspectors) of the credit division accept applications for loans. Depending on the types of lending, the loan application is accompanied by the receipt and selection of the necessary documentation. Here, the employee of the credit department is obliged to conduct an economic analysis of the provided documentation, draw conclusions about the market opportunity and attractiveness of the credit operation. When carrying out such work, an employee of the credit department requires the skills and abilities of an economist, a marketing specialist, knowledge of macroeconomics, industry and regional trends in the development of the national economy.
Based on the analysis carried out, it is required to choose the most optimal lending method, type of loan account, loan term, negotiate the amount and type of loan rate, as well as the method of loan repayment. A separate issue in modern Russian banking practice is the solution to the problem of collateral. Particular attention is paid to this issue due to the lack of a practically operating mechanism for handling judicial recovery to a dishonest borrower. Until a creditor in Russia sees a real opportunity to recover his funds through arbitration, until then one of the indicators of the professionalism of loan officers will be the availability of skills in working with collateral. The liquidity crisis and bankruptcy of banks directly depend on the risky credit policy of bank management and the ability to work with collateral for employees of credit departments.
In accordance with Article 329 of the Civil Code of the Russian Federation, the fulfillment of obligations by debtors can be ensured by: a penalty; pledge; retention of the debtor's property (mortgage); bank guarantee; deposit; in other ways provided by law or contract. The choice of the appropriate method of securing the fulfillment of an obligation largely depends on the nature of the latter. For obligations arising from a loan agreement or a credit agreement, a pledge, surety, bank guarantee. The borrower can use one or several forms at the same time as credit collateral, which is fixed in the loan agreement. Security for obligations to repay the loan is drawn up together with the loan agreement and is a mandatory annex to it.
Preparation and conclusion of a loan agreement is the most important final procedure of the stage of granting a loan. It must be emphasized that the loan should be issued for the implementation of a certain business transaction and not in exchange for the provision as such. Collateral is the bank's last line of defense and the decision to grant a loan should always be based on the merit of the project being funded, not on the attractiveness of the collateral. If the very basis of a credit transaction is associated with increased risk, it would be a big mistake to issue a loan against good security, using it as a source of debt repayment. Therefore, the issue of collateral should be resolved after the loan transaction is considered acceptable to the bank.
It is the second place of the issue with security after economic analysis distinguishes bank lending from lending operations of non-banking credit institutions, for example, from pawnshops. True, in the existing Russian banking practice, it should be noted that the issue of collateral often comes out on top. This is probably due to the increased riskiness of operations financed by banks, the presence of a large number of risks in the near-bank market space, and the lack of high-quality, highly reliable borrowers with a long credit history. It is desirable for the bank to have close contacts with the most professional participants market, the goods of which are accepted by the bank as collateral. Professionals will assist in conducting a qualitative examination of the goods, possibly provide information about the borrower and his market position in a given period, and draw up an optimal scheme for possible implementation in case of non-return. The third stage of the credit process is the control over the use of credit. The use of a loan means the direction of the funds allocated by the bank to make payments on the obligations of economic and financial activities. The most important condition the use of loans is the effectiveness of a credit measure, which makes it possible to ensure the receipt of cash proceeds and profits to repay the debt to the bank and pay interest money. The main purpose of this stage of the credit process is to ensure regular payment of interest on the debt and repayment of the loan.
Of course, for every loan there is a risk of default due to unforeseen developments. A bank may have a policy of issuing loans only to absolutely reliable borrowers, but then it will miss many profitable opportunities. At the same time, if there are difficulties in repaying the loan, it will cost the bank very dearly.
Therefore, a prudent credit policy is aimed at ensuring a balance between caution and the maximum use of all potential opportunities for profitable allocation of resources.
Difficulties with repayment of loans most often do not arise by chance and not immediately. It is a process that develops over time. An experienced bank employee can notice early signs of a nascent process financial difficulties experienced by the client, and take measures to correct the situation and protect the interests of the bank. These measures should be taken as early as possible before the situation gets out of hand and the losses become irreversible. At the same time, it should be taken into account that the bank's losses are not limited to non-payment of debt and interest. The damage to the bank is much greater, and it may be associated with other circumstances that also have to be taken into account:
- - the reputation of the bank is undermined, as a large number of overdue and outstanding loans will lead to a drop in the confidence of depositors, investors, etc.;
- - administrative costs will increase problem loans require special attention of credit personnel and unproductive expenditure of working time;
- - the threat of leaving qualified personnel will increase due to a decrease in the possibility of stimulating them in the face of falling profitability of operations;
- - funds will be frozen in unproductive assets;
- - there is a danger of a debtor's counterclaim against the bank, which can prove that the bank's demand to withdraw the loan brought it to the brink of bankruptcy.
All these losses can cost the bank dearly and far exceed the direct loss from defaulting on the debt.
The fourth stage of the credit process is the return of a bank loan. The return of loans means the return of funds to banks and the payment of the corresponding amount of interest. If the debtor returns the loan without any problems and pays interest on it, then it remains only to close the credit case (dossier) and keep in mind the future of this borrower as a promising and already having a positive credit history in this bank.
If there is a default on the loan and non-payment of interest, then all employees of the credit department of the bank will have to do a tremendous job to eliminate this problem loan, and then they must definitely go through an analysis of the mistakes made in the process of making a decision on issuing a loan and checking its use. But in the case of the adoption of high-quality loan collateral, which allows you to quickly implement it and repay the amount of the principal debt, interest on it, fines and late fees, we can talk about closing a problem loan in the event of any crisis.
This is where the qualifications of appraisers and the convenience of the chosen scheme for accepting collateral to the bank are tested. Therefore, let us consider in more detail the process of credit monitoring carried out by the bank.
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