Abstract:

There are cardinals principles of consumer credit lending that have been followed by the local
and foreign commercial banks since long. These are the principles of safety, liquidity and
profitability. The first and foremost principle of lending is to ensure the safety of the funds along
with interest, according to the terms of loan contract. Secondly, banks are lending funds for short
periods and mainly for less risk of capital. Banks always want to liquidate their capital as early as
possible due to risk. Finally, commercial banks are profit earning institutions that is why, banks
always looks greater profit in their consumer credit scheme (Sundharam, 1995). There are some
others principles in lending consumer credit to the customers such as purpose of loan,
diversification of risk, following the national policy and less risk financing.