Banks require security against loans to manage risks; EFT enhances transaction efficiency and security.
Banks require security against issuing loans to mitigate the risk of potential defaults. By having collateral or assets as security, banks safeguard their funds and ensure they can recover the loaned amount in case of non-payment.
Electronic Fund Transfer (EFT) benefits the economy by improving transaction efficiency, reducing costs associated with manual payments, enhancing security, and increasing convenience for consumers and businesses.
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Answer:
1. Banks require security against the issuing of loans to mitigate the risk of borrowers defaulting on their loans. By obtaining collateral or security from borrowers, such as property or assets, banks ensure that they have a way to recover their funds in case the borrower is unable to repay the loan. This security provides a level of assurance to the bank, allowing them to offer loans to a wider range of customers while still protecting their interests.
2. The use of electronic fund transfer (EFT) benefits the economy in several ways:
- Efficiency: EFT eliminates the need for physical checks or cash transactions, making payments faster and more convenient. This efficiency leads to quicker processing times and reduced paperwork, ultimately saving time and resources for businesses and consumers.
- Cost-effectiveness: EFT transactions are typically cheaper than traditional paper-based transactions. With lower transaction costs, businesses can save money on processing fees, which can lead to overall cost savings that can be passed on to consumers.
- Transparency and security: EFT transactions are trackable, providing a clear record of funds transferred from one account to another. This transparency helps prevent fraud and ensures the security of financial transactions, boosting consumer confidence in the banking system.
- Accessibility: EFT allows for seamless electronic transactions across different banks and financial institutions, enabling individuals and businesses to transfer funds easily regardless of their physical location. This accessibility promotes financial inclusion and contributes to the overall efficiency of the economy.
In conclusion, the adoption of EFT in the economy leads to increased efficiency, cost savings, transparency, security, and accessibility, all of which contribute to the overall growth and development of the financial sector.