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Why do Banks Fail? Author info | Abstract | Publisher info | Download info | Related research | Statistics SANTONU BASU
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Banks advance loans in the absence of precise knowledge in relation to the outcome of borrowers' projects. Consequently, uncertainty in relation to loan repayment emerges. Thus, banks introduce the 'credit standard' as insurance against loans, so that should borrowers' projects fail, borrowers have an alternative means of honouring their debt obligations. It is argued in this paper that in the competitive atmosphere under which this sector operates, it is not possible to secure the entire loan portfolio by introducing the credit standard, and in recent years this difficulty has been further exacerbated by financial liberalisation, which may have caused bank failures.
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Article provided by Taylor and Francis Journals in its journal International Review of Applied Economics .
Volume (Year): 17 (2003)
Issue (Month): 3 (July)
Pages: 231-248
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Santonu Basu, 2006.
"Structural Problems in Financing Development: Issues Relating to India ,"
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