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Why are the banks reluctant to lend, and what should be done to increase bank lending?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 8QTD

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Concept explainers

Regulation of Commercial Banks

The main function of any commercial bank is accepting deposits and lending money to borrowers. Apart from these two activities, commercial banks provide a host of other services to their customers, like discounting bills of exchange, acting as a custodian of a customer's will, and so on. In the absence of a proper regulatory framework or proper regulations in place, the commercial banks would have ended up charging exorbitant or varied rates of interest or service charges on the funds loaned by them or the services performed by them.

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Why are the banks reluctant to lend, and what should be done to increase bank lending?

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Similar questions

What are the advantages and disadvantages of direct lending for the bank? How are banks reducing the effect of the disadvantages?
What are the advantages and disadvantages of direct lending for the bank?
How do adverse selection and moral hazard affect the bank lending function? And How can minimise such problems?
what is ADVANTAGES AND DISADVANTAGES OF THIS MORATORIUM in banking to BANKS . Give an example
Which of the following decreases the likelihood of bank failures by keeping banks from making risky loans? FDIC insurance The discount window Reserve requirements Capital requirements
Why is the Fed’s discount window considered the “lender of last resort” for some banks?
what is ADVANTAGES AND DISADVANTAGES OF THIS MORATORIUM FOR THE BANKS AND BORROWERS? provide EXAMPLES.
What risks might commercial bank operations face by funding long-term loans such as mortgages to borrowers (often at fixed interest rates) with short-term deposits from savers? What steps could the financial institution take to reduce these risks?
What are the advantages and disadvantages of direct lending for the consumer? What can banks do to limit the disadvantages?
If the bank decides to cut down on interest expenses by reducing its dependence upon borrowed funds, what policy must the bank follow?
Is decreasing provisions for bad debts and loan a good recommendation for a bank?
What is adverse selection? Why does it predict that lenders will prefer to arrange loans through a commercial bank rather than deal directly with a borrower?