Why do Banks require bank statement for processing a loan application?


Why do Banks demand bank statement while processing a loan application? Is a bank statement important? If yes, please explain its role while applying for a loan.


Whenever you apply for any loan, the bank account statement is one of the most important documents that lender asks. Through your Bank Statement, the lenders verify your banking habits, lifestyle (easily noticeable if you use your debit card frequently), your repayment behavior (if any EMI is debited regularly from your bank account) and monthly credit of salary etc.

Tips for excellent Banking before your apply for a loan:

The lender expects you to have a good credit balance every month (at least equivalent to the EMI that you will repay for your Loan). Please ensure that there is no cheque bouncing especially due to “Insufficient Funds”. However, other cheque rejection reasons like “Signature Mismatch” are still acceptable as an exception. But such instances should not exceed twice in last 6 months to 1 year. The lenders generally ask for last 6 months Bank Statement, if you are salaried, and last 1 year statement, if you are self-employed.



Banks usually ask for the applicant’s bank statements to check the transactions in the last six months. This is asked by the bank:

To Check The Activity Level: This applies to a self-employed individual. It gives a proper evidence of the business activities done through the bank.

To Check The Average Balance: A sufficient amount of balance maintained by the applicant can raise a green flag for the loan sanction. So, a bank investigates this to see the saving and spending habits of the applicant.

To See Cheque Returns: This is usually a small fee debited by the bank when the cheque handed out by the applicant was actually returned by the bank. The more the cheque returns, the lesser are the chances for the loan to be sanctioned.

To Look For Cheque Bounce: Any cheque bounces that are visible in the bank’s statement. Note that every bank has certain norms on how much of that can be acceptable in a one-year period. The more the bounces, higher the chances of loan rejection.

To Check For Consistent Periodic Payments: If there are any periodic payments done to the other financial institutions or banks, then it is a clear sign that there exists a liability. In such cases, the applicant has to provide complete details.

To Check For Investments: Any investment made by the applicant will also be helpful while sanctioning the loan. In fact, this assists a bank to assess the abilities of an applicant to pay off some amount as down payment.

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BB Expert


Because they want to check your credit status and income so they can decide accordingly. You can check the status while applying the loan.