Liquidity: It is also necessary that the money lent by banks must come back on demand or according to pre-agreed terms of repayment. The borrower must be in a position to repay within a reasonable time after a demand for repayment is made. This is more likely if the money is employed by the borrower for short-term requirements and not locked up in assets or schemes which take a long time to repay. The source of repayment must also be definite. Even if the bank lends for longer periods, it must verify the end use of the funds lend, and the feasibility and viability of the borrower’s project to ensure his ability to repay the funds within the stipulated time in the stipulated manner.
