CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
To every nation, the existence of banking industry is inevitable. This necessitates the need for deposit and credit mobilization. Osayeme (1936) reported that lending has become a vital function in banking operation because of its direct effect on economy, growth and business development. A bank is an organization that accepts money in different account and honors cheque drawn upon it, return of the same amount on demand by depositor or at a specified maturity date. According to Haisbury Laws of English, a bank or banker in an individual, partnership or corporation whose sole or predominant business in banking, that is the receipt of money on current or deposit account and the payment of cheque drawn by the collection of cheques paid in by a customer. The above definition is suitable for the description of a commercial bank, commercial as a bank of common people are organized on a joint stock company system with primary aim of making a profit as any other business venture carried out, if the profit is not forthcoming, then the rate of patronage and intimacy must be improved between the buyer and the seller.
This is done by granting of credit to customer of financing in modern business. In order to protect the creditor (that is, he person who gives out loans), certain policies must be complied with. These protective weapons are credit standard credit terms and collection efforts. By credit stand we mea the criterion which a form followed in selecting a customer for credit extension. Credit terms could be the stipulation under which credit is extended to customer, for instance, it expected that a customer will pay his credit obligation of later than 35 days. A collection policy is needed because not all debtors pay their debt in time, some customers are slow payers, while some are not payers. The aim of collection effort is to speed up the payment. However, the motive of granting credit facilities with the aim of increasing the volume of profit have become somehow difficult to realize by commercial bank a business today operate in harsh erratic economic climate. As a result, granting of credit to assessment have both positive and negative impact on the commercial banking sector (especially in Nigeria). To survive in Nigeria (banking business), it is wise for commercial banks to increase their liquidity (cash). This can be brought about by effective credit assessment and a design of comprehensive policy in granting credit. Banks must follow clear, and sequential procedures to recover their debt, it is not done, there is great tendency for them to lose the whole amount.
1.2 Statement of Problem
It is important to recognize the two fundamental functions which a banker must perform. It must attract deposit on one hand and attract borrowers and users of services on the other hand. Those average positioned were at a staggering level of performance. This menace is as a result of high level of bad debts with associated problems brought about distress in many banks. Hence tribunal came to place to recover these bad debts. Despite the strict conditions that prevail lending of procedure commercial bank still find their administration difficult because of the fluctuating effect of some factors such as economic policy and more so that the attitudinal tendencies credit, in that all banks are exposed to available fund at all times of boom, hence their lending ability is high. But in period of depression, lending money will mean exposing the bank into a greater risk. Then the problem of human beings their attitude is evident in question like what is the intent of borrowers before and after credit facility has been granted him? business was frustrated by promulgation of decree?
