Sound lending policy means a lending portfolio statement that gives importance in two issues: (1) lending activities meet the regulatory standard, and (2) the loan is profitable. This is the two most important criteria that any sound & profitable lending policy must incorporate.
Such a policy gives loan offers & the banks management specific guidelines in making individual loan decisions & in shaping the banks overall loan portfolio. The actual make up of a banks lending policy should reflect what the bank wants to achieve in this immensely competitive financial system.