What Are The Precautions For Loans On Security Of Shares?

When the banker is to advance loans on the security of shares he should take the following precautions for the safety of the capital.

The banker can safely advance loans against securities issued by the government, semi-government bodies, public utility companies, banks and well-reputed companies as they are normally safe, easily marketable, and stable in price and yield a fair income. The stocks and shares which are partially paid up are to be examined with utmost care before any commitment is made to the customer. The bank shall have to meet the liability of the unpaid amount in case the bank has taken a legal mortgage and is registered as holder of shares.

There is a mushroom growth of joint stock companies after the industrial revolution. The banker while selecting the shares as a cover for advances must have with him an up-to-date list of approved securities. The selection of securities to be brought on the approved list should be made after a through scrutiny of the companies, past standings, their reputation in the market, examination of their balance sheets, the management and direction of the companies by their directors, the dividends paid on the shares, marketability of shares of the company.

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When the banker is to advance loans on security of stock and share, there should be some precaution for safety of the capital.

The banker can safely advanced loans against securities issued by the govt, semi govt. bodies, public utility companies, banks and well reputed companies as they are normally safe, easily marketable, stable in price and yield a fair income. The stock and shares are partly paid up are to be examined with utmost care before any commitment is made to the customers. The bank shall have to meet the liability of the unpaid amount in case the bank has taken mortgage and is registered as holder of the shares.

There is a mushroom growth of joint stock companies after and shares as a cover for advances must have with him an up to date list of approved securities. The selection of securities to be brought on the approved list should be made after a thorough scrutiny of the companies, past standings, their reputation in the market, examination, of their balance sheets, the management and direction of the companies by their directors, the dividends paid on the shares, marketability of the shares of the company, etc.The third most important precaution which the banker is to take the assessment of the value of the stock and shares offered as security for advances. The bank in longer to be on safe side is to keep sufficient margin for market fluctuations of the prices of share and stock.

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