Why margins are maintained by the bank?
CS Professional · Banking - Law and Practice · PYQS · June 2015
Why margins are maintained by the bank?
Answer & Explanation:
A banker always keeps adequate margin because of the following reasons: The market value of the securities is liable to fluctuations in future with the result that the banker's secured loans may turn into partly secured ones. The liability of the borrower towards the banker increases gradually as interest accrues and other charges become payable by him. Hence, margins acts as a safety net which banker keeps cover the present debt and the future additions to them.
Topics: Banking Law and Practice
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