Why do banks entrust loans? Entrusted loan means that a unit or individual entrusts a large amount of idle funds to a bank to lend to a customer, and the bank, as the trustee, lends the funds entrusted by the client to a customer who needs funds. The qualification of the borrower must be approved by the principal. Banks can only charge relevant fees, and do not bear the risk of capital borrowing, and the capital risk is borne by customers themselves.

What is the real reason for banks to entrust loans?

The most fundamental reasons for the existence of entrusted loans are national interests and financial management requirements. Specifically, there are about three reasons.

First of all, most banks are state-owned banks. If social subjects are allowed to borrow from each other at will, it will inevitably affect the income of banks. Therefore, it is forbidden to borrow directly from the other party without going through the bank. To put it bluntly, banks should share a piece of the action.

Second, the financial level of some social subjects is relatively poor, and banks can do an audit through banks (although banks are actually a procedure now);

Third, through the indirect financial management of banks and the entrusted loans of banks, we can control the scale of loans flowing out of banks as a whole, and avoid the fact that private loans are too large to be discovered in time.