Question

14

Which of the following are principles of sound banking behavior?

a		Avoid an undue concentration of loans to single activities.
b		Control mismatches between assets and liabilities.
c		Expand cautiously into unfamiliar activities.
d		all of the options

Answer 1

All the options are corrret

Banks should not have large exposure to either single group of companies or sectors which could lead to insolvency when these particular sectors or companies do not perform

One of significant rules that a bank show maintain is to match their asset and liabilities profile. Other wise banks should face liquidity issues.

If any comapny or sector has very niche position, banks should be careful while funding or control their funding to them to avoid any loss of money.