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When commercial banks lend money then how can it be liability for them.as loan advanced should be assets of the bank.?
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When commercial banks lend money then how can it be liability for them...
Money lended by bank is not the money of bank rather it's a deposits of public so that's why it is a liability for them as these deposits are demand deposits which can be withdrawn as demand
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A large number of the branches of banks have been set up in the villages. The main purpose of setting up these banks is to develop the habit of saving among the villagers and also gives loans to the farmers for boosting the production in one or the other way. So far the banks had been concentrated in the big cities and Indian villagers had no faith in them. The new banks also intend re-channelling bank credit from the big industries to small sectors. With the intention to promote rural banking, Regional Rural Banks were established. These combined the local field with the rural problems. These banks are not to replace the other credit giving bodies but to supplement them.The Steering Committee of the Regional Rural Banks considered some structural changes. First of all they gave thought to the staffing spectrum then to effective coordination among banks- rural cooperatives and commercial-and the possibility of bringing credit within the access of weaker sections. They wanted to recruit the staff for the rural banks at lower salaries. But this type of discrimination would have been dangerous. So it was given up.Another problem with regard to the rural banks is the creditworthiness of the poor. Indian farmers are so poor that they cannot pay back their loans. The rural Indian surveys it quite clear that practically they have no credit worthiness. Their socio-economic mobility is almost zero. Long ago in Ranchi the Government experimented with the idea of advancing loan but the experiment failed, that is why the banks used to fear that their credit would never be paid back.Another difficulty for the rural banks is that loans cannot be so easily processed. Processing loans will also entail heavy expenditure. This is also going to affect their financial position. Still the establishment of the rural banks has been decided because the social advantages are more important than the commercial consideration.Rural banks will definitely encourage savings. It is not the proper time to mop up the rural surplus. No doubt villages do not have to pay income tax and they get many other concessions, yet their saving is not significant. Beside all these hurdles rural banking system will boost up the economy of villages, and so the economy of the country.Q. "This type of discrim i nation would have been dangerous". What is referred to as being dangerous?

A large number of the branches of banks have been set up in the villages. The main purpose of setting up these banks is to develop the habit of saving among the villagers and also gives loans to the farmers for boosting the production in one or the other way. So far the banks had been concentrated in the big cities and Indian villagers had no faith in them. The new banks also intend re-channelling bank credit from the big industries to small sectors. With the intention to promote rural banking, Regional Rural Banks were established. These combined the local field with the rural problems. These banks are not to replace the other credit giving bodies but to supplement them.The Steering Committee of the Regional Rural Banks considered some structural changes. First of all they gave thought to the staffing spectrum then to effective coordination among banks- rural cooperatives and commercial-and the possibility of bringing credit within the access of weaker sections. They wanted to recruit the staff for the rural banks at lower salaries. But this type of discrimination would have been dangerous. So it was given up.Another problem with regard to the rural banks is the creditworthiness of the poor. Indian farmers are so poor that they cannot pay back their loans. The rural Indian surveys it quite clear that practically they have no credit worthiness. Their socio-economic mobility is almost zero. Long ago in Ranchi the Government experimented with the idea of advancing loan but the experiment failed, that is why the banks used to fear that their credit would never be paid back.Another difficulty for the rural banks is that loans cannot be so easily processed. Processing loans will also entail heavy expenditure. This is also going to affect their financial position. Still the establishment of the rural banks has been decided because the social advantages are more important than the commercial consideration.Rural banks will definitely encourage savings. It is not the proper time to mop up the rural surplus. No doubt villages do not have to pay income tax and they get many other concessions, yet their saving is not significant. Beside all these hurdles rural banking system will boost up the economy of villages, and so the economy of the country.Q. Why has the establishment of rural banks been decided despite the challenges involved in the process?

A large number of the branches of banks have been set up in the villages. The main purpose of setting up these banks is to develop the habit of saving among the villagers and also gives loans to the farmers for boosting the production in one or the other way. So far the banks had been concentrated in the big cities and Indian villagers had no faith in them. The new banks also intend re-channelling bank credit from the big industries to small sectors. With the intention to promote rural banking, Regional Rural Banks were established. These combined the local field with the rural problems. These banks are not to replace the other credit giving bodies but to supplement them.The Steering Committee of the Regional Rural Banks considered some structural changes. First of all they gave thought to the staffing spectrum then to effective coordination among banks- rural cooperatives and commercial-and the possibility of bringing credit within the access of weaker sections. They wanted to recruit the staff for the rural banks at lower salaries. But this type of discrimination would have been dangerous. So it was given up.Another problem with regard to the rural banks is the creditworthiness of the poor. Indian farmers are so poor that they cannot pay back their loans. The rural Indian surveys it quite clear that practically they have no credit worthiness. Their socio-economic mobility is almost zero. Long ago in Ranchi the Government experimented with the idea of advancing loan but the experiment failed, that is why the banks used to fear that their credit would never be paid back.Another difficulty for the rural banks is that loans cannot be so easily processed. Processing loans will also entail heavy expenditure. This is also going to affect their financial position. Still the establishment of the rural banks has been decided because the social advantages are more important than the commercial consideration.Rural banks will definitely encourage savings. It is not the proper time to mop up the rural surplus. No doubt villages do not have to pay income tax and they get many other concessions, yet their saving is not significant. Beside all these hurdles rural banking system will boost up the economy of villages, and so the economy of the country.Q. How will the RRBs help in the economy of the country?

Agriculture in India has not reached its total potential. It is observed that the following measures can be undertaken to reach the maximum potential of the agricultural production:(I) The supply of finance should be fully institutionalised and dependence on private sources for credit should be eliminated.(II) The interest rate should be low in general. The banks should charge different rates for different uses.(III)The basis of credit should not be mortgage of any security. Production or productivity of land should be the basis for the approval of loans.(IV)The conditions of repayment of loans should be different so as to suit different circumstances.(V) It should be ensured that finance is used for production. Loans can be given in the form of goods like seeds, fertilisers, etc.(VI)There should be adequately trained and devoted personnel to manage the financial institutions. The persons should have full knowledge of agriculture and interest of farmers. The person should be able to guide the farmers on how to use the loan systematically.Q.Which among the following are the institutional sources of finance for agriculture?

When commercial banks lend money then how can it be liability for them.as loan advanced should be assets of the bank.?
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When commercial banks lend money then how can it be liability for them.as loan advanced should be assets of the bank.? for Class 12 2025 is part of Class 12 preparation. The Question and answers have been prepared according to the Class 12 exam syllabus. Information about When commercial banks lend money then how can it be liability for them.as loan advanced should be assets of the bank.? covers all topics & solutions for Class 12 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for When commercial banks lend money then how can it be liability for them.as loan advanced should be assets of the bank.?.
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