Question

What is a weakness of a centralized approach to loan approval authorities?

Answer 1

Weaknesses of the centralised approach to the loan approval authorities-

A. Local inefficiency would be very high- there would be a high degree of inefficiency which will be present at the top is there will be a very Limited number of persons who would be continuously making decisions regarding loan approval

B. Limited commitment- there will be a lack of commitment in increasing the overall loan portfolio of company

C. Limited amount of loan - the total amount of loan portfolio would be very lower as there would be very high degree of credit worthiness which will be required and it would be assisting in lack of growth of loan portfolio

D. Rigid system of approval of loans- there would be a rigid system which will not be adapting to the changes of the external environment because this Central authority will be not changing according to the need

E. Resistance to changes- there would be a high degree of resistance to the changes as there would be a small number of persons were making decisions

F. Poor creativity- there would be a lack of creativity of the top management because they would be doing it on a routine basis and they will be able to just do it like a routine work not some creativity will be observed.

G. there will be a high degree of risk related to fraud because there will be related party transactions as as there will be decision making at very small level.