Purpose of the loan

The credit officer of the bank should discuss and identify the genuine need of the borrower. The period of the loan as to whether it is for working capital, asset purchase, or debt refinancing. The amount required, and the benefit of the fund to the business. The credit officer should understand the business segment in which the loan amount would be deployed and the resultant increase in cash flow/income from the use of funds. The credit officer should discuss with the borrower about the amount of contribution that would be made to the business by additional assets that would be purchased and deployed and its contribution towards repayment of the loan amount. The purpose should be in line with the Bank's policy of preference if any, diversification motive and comply with the directives of the central bank. It should align with the economic policy of the state i.e. Employment, the promotion of economic activities in a particular sector or geographic area of the state, province, or district.