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Sound Banking Principles

‡ Liquidity
± The capacity of the bank to produce cash ± The liabilities of the bank are repayable on demand ± The banks must maintain sufficient liquid assets ± Liquid assets may be in the form of cash or readily realisable assets

‡ Safety
± The commercial bank is in the nature of trustee of money belonging to the public ± It must exercise greatest care and vigilance in the matter of investing its funds ± It should not invest in risky assets

‡ Profitability
± One of the principal objective of a bank is to earn income to meet all its expenses and pay a fair return to its stakeholders ± A bank ahs to distribute its funds among various assets in such a manner as to derive sufficient income

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