Credit Investigation and Selection of Borrower
Credit Investigation:
Sanctioning credit is the main function of a bank and it is the prime source of earning of a bank. So, a banker must sanction credit. But only sanctioning a lot of credit will not serve the purpose of the bank. It is only good credit that will serve the purpose of the bank. It is even better not to sanction any credit rather than sanctioning a bad credit. Selection of good borrower is the starting point of the process of creation of good credit. Before sanctioning credit, a banker wants to be sure about the repayment.
For ensuring loan repayment a bank can go for preventing measure or curative measure or both. But curative measures are always costlier than preventive measures in terms of both time and money. So credit investigation as a preventive measure is required for selection of good borrower. Credit investigation and selection of good borrower may substantially help a bank in the recovery of extended credit.