To conduct loan operations efficiently & successfully ,it is important to formulate a clear cut and comprehensive loan policy .Without an adequate loan policy .even the efficient loan officers very often fail to run the loan activities properly.
The loan activities will be prone to error & mistake if the directions regarding the availability of loan able funds .the guidelines about the sectors for which loan to be made available .duration & maturity of loan besides nature of collaterals are clearly spelled out & prefixed.
On the other hand loan officers may be .absent .ill .transferred, dismissed or retired ,in that case .written policy guidelines will facilitate the new officers replaced in such positions.
Under these circumstances, if there is no specific loan policy .management will suffer a lot in taking many of the loan related decision or even remain confused.
Bank loan policy is the compilation of some wise decisions which help the loan officer in every steps of the loan process to execute his/her duty efficiently & properly.
According to Edward W. Reed, a bank scholar,”[A loan] policy establishes the direction & use of the funds of a bank that have derived from stockholders & depositors, and influences the decision or whether or not to lend”.
At last it can be said that ,the written loan policy is beneficial in case in order to handle loan activities of a bank in the situations stated.
The absence .transfer or retirement or plight for better prospect of any employee may not create any complexity if the policy is properly spelled out & documented.
Steps of Bank Loan Policy
As bank loan policy is an important policy for the bank so ,the bank loan policy is a process which has been by the bank step by step .This steps has been shown below:
Responsibility of Preparing Loan Policy
Loan is the special aspect of the important policies taken by a bank .Board of directors has ultimate power & responsibility in this regard.
Before that Joan officers prepare a draft loan policy .make necessary modification through several workshops & then submit it to the loan committee which is formed by the members of the board of directors.
Loan committee restructures the loan policy in several meetings & submits it to the board of directors for approval .After necessary modifications & improvements ,the loan policy gets the final approval from the board of directors.
Written or Unwritten Loan Policy
Both written & unwritten loan policies are in different banks .Although written loan policy is preferable to the unwritten one.
Because ,the written loan policy can overcome the situation arisen in the absence of experienced bank officers or in case of misunderstanding among the newly assigned loan officers.
Written loan policy can be updated on the basis of experiences & the need of the hour.
Whether Loan Policy Should be Rigid or Flexible
Loan policy can be rigid or flexible .Flexible loan policy has some benefits as well as some problems. But as per the opinion of expert bankers & banking specialists, flexible loan policy has more benefits than problems.
But as per the opinion of expert bankers & banking specialists ,flexible loan policy becomes popular due to its liberal stands for adjustment in case of changed situation & other unavoidable future contingencies.
Elements of Successful Loan Policy
Loan policy provides proper directions & guidelines to the officers in-charge of loan management, it helps the bankers to handle loan operations smoothly & effectively.
The bankers find it quite easier to make credit decision when the policy covers all the areas of managing loan cases.