After studying this chapter you will be able to understand: Loans and advances, classification of Loans are? advances, bank grant short-term financial assistance by way of? Overdraft, evaluation of loan proposals. | Revise Lecture 20 Loans and Advances Loans and Advances Lending money is one of the two major activities of any bank. The bank acts as an intermediary between the people who have the money to lend and those need money to carry out business transactions. Loans and Advances A loan is granted for a specific time period. Generally, commercial banks provide short-term loans. But term loans, . loans for more than a year, may also be granted. The borrower may be given the entire amount in lump sum or in installments. Loans and Advances Q: Some of the securities against which the banks lend are? Loans and Advances Commodities Debts Financial instruments Real estate Automobiles Consumer durable goods Documents of title Loans and Advances Q: Classification of Loans are? Loans and Advances Classification of Loans Bank loans can be classified as follows according to the activity being financed; Priority sector lending Commercial lending Loans and Advances Classification of Loans . | Revise Lecture 20 Loans and Advances Loans and Advances Lending money is one of the two major activities of any bank. The bank acts as an intermediary between the people who have the money to lend and those need money to carry out business transactions. Loans and Advances A loan is granted for a specific time period. Generally, commercial banks provide short-term loans. But term loans, . loans for more than a year, may also be granted. The borrower may be given the entire amount in lump sum or in installments. Loans and Advances Q: Some of the securities against which the banks lend are? Loans and Advances Commodities Debts Financial instruments Real estate Automobiles Consumer durable goods Documents of title Loans and Advances Q: Classification of Loans are? Loans and Advances Classification of Loans Bank loans can be classified as follows according to the activity being financed; Priority sector lending Commercial lending Loans and Advances Classification of Loans Priority sector lending: The Government of Pakistan, through the instrument of SBP, mandates certain types of lending on the banks operating in Pakistan irrespective of their origin. SBP sets targets in terms of percentage (of total money lent by the banks) to be lent to certain sectors which, in its perception, would not have access to organized lending market or could not afford to pay the interest at the commercial rate. Loans and Advances Classification of Loans Priority sector lending: This type of lending is called priority sector lending. Financing of small industry, small business, agricultural activities and export activities fall under this category. This is also called directed credit in the Pakistan banking system. Loans and Advances Classification of Loans Commercial lending: Commercial lending is the mainstay of Pakistan banking, its bread and butter activity. Historically, this activity had been relegated to a secondary position as banks were driven by the desire to .
