Documentation and Margin in Banking
Documentation
Documentation is a salient feature of sound lending. The terms and conditions under which the loan is sanctioned and the security accepted are put down in writing and signed by the borrower. Obtaining such agreement is called documentation. Such agreement specifies the rights and liabilities of the banker and the customer. Banking documents – is a written order to the client or the responsible officer of the bank to conduct monetary settlement operations or other operations in the bank. So, there is no room for misunderstanding of the terms between both the parties.
Margin
The margin is the provision of safety maintained by the banker while advancing against sureties. The margin is the difference between the total value of securities held in an investor’s account and the loan amount from a broker. A banker does not lend the full value of the security offered by the borrower. He retains a margin over it. The margin is the difference between the market value of the security offered and the loan granted. For instances, if a building worth $ 10000 is submitted as security. The borrower will sanction only $ 5000. He lends only 50% of the value of the property, the remain 50% is margin.
In business accounting, margin refers to the dissimilarity between revenue and expenses, where businesses naturally pathway their gross profit margins, operating margins and net profit margins.
