Ganesh has taken a loan of ₹ 5 million against mortgage of a commercial property valued at ₹ 20 million. The KYC and credit information collected during the opening of the account showed that Ganesh was a real estate dev

At the time of lending, the banker enquires from the borrower the purpose for which he seeks the loan. Banks do not grant loans for each and every purpose—they ensure the safety and liquidity of their funds by granting loans for productive purposes only, viz., for meeting working capital needs of a business enterprise. Loans are not advanced for speculative and unproductive purposes like social functions and ceremonies or for pleasure trips or for the repayment of a prior loan. Loans for capital expenditure for establishing business are of long-term nature and the banks grant such term loans also. In present case, first of all, it has to be seen how the current account was funded for the earlier pre-closure. If these were through cash deposits or other deposits that cannot be connected to his business or personal finance, then Bank have to file a Suspicious Activity Report (SAR). If the funding is through genuine business receipts or transparent personal financial transactions, you may seek further clarifications from the customer through normal queries like the purpose of taking the loan, how he intends to repay, etc., and if you are satisfied with the responses, go ahead with the transactions in the usual course of business.