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why do bank ask for collateral while being credit to the borrower

Bank ask for collateral while giving  credit to borrower because if the borrower fails to repay the loan the bank has right to use or sell the collateral given to him by the borrower so that they can get money which they gave him as a loan.if the borrower gives the loan in time than the bank gives collateral back to borrower.
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to assure what they have lended they get back .If the borrower is not able to return the money they can sell the collatral and get the money back.
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The collateral work as the security for the bank as if the borrower doesn't pay the sum of money taken from bank the bank has a right to seal or buy the given collateral. It is the assurity that borrower will pay back money.
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these are some reasons why banks asks for collateral while being credit to the borrower:
  • If the borrower fails to repay the loan, the lender has the right to sell the asset or collateral to obtain payment. 
  • Reduction of exposure in order to do more business with each other when credit limits are under pressure.
  • Possibility to achieve regulatory capital savings by transferring or pledging eligible assets.
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i hope the answer was helpful !
 
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Banks ask for collateral while giving credit - (1) so that there is a guarantee of repayment. (2) so that force could be made on borrowers for repayment (3) in the case of non-repayment , banks can sell the collateral to get their credit back
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