Repayment of the loan depends on the borrower's
Awillingness to pay
Bability to pay
CBoth A & B
DNone of these
Answer:
C. Both A & B
Read Explanation:
Security or Safety:
- A bank deals money of the public. A bank cannot invest its fund in risky businesses.
- To win confidence of the public is more important in banking business.
- As the bank lends the funds entrusted by the depositors, the first and foremost principle of lending is to ensure the safety of the lent funds.
- Security means that the borrower is in a position to repay the loan with interest as per the terms of the loan agreement.
- Repayment of the loan depends on the borrower's
- ability to pay and
- willingness to pay
- Willingness to pay depends on the honesty and character of the borrower.
- The banker usually relies on the security of tangible assets owned by the borrower to ensure the safety of his funds