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Credit policy not only varies from bank to bank but within the same bank through different time periods. The bank to bank variation is expected, as credit policy can be a form of competitive advantage. A loose (riskier) credit policy can expose the bank to higher risk but higher returns; a tight (less risky) credit policy provides greater stability of income flows. Although in theory banks should be rational actors with respect to credit policy, evidence shows that they often follow money supply stimulus and the lead of other banks. This results in banks supporting negative NPV projects during market upswings and rejecting positive NPV projects during market downswings (Rajan, no date)

Banks execute their credit policies by a number of means. As noted earlier, most banks have a wide range of products at their disposal. Credit officers must assess the clients need and find the right product. Choosing the right product should result in maximizing the profit for the bank and the benefit for the consumer. There can be significant differences between consumer credit products. Thus it is critical that banking officers understand each different product, the circumstances for which it is best used and the needs of

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