Description
This is a PPT about balance sheets of a bank, Performance Review System, RBI as a regulator, types of banks, borrowers, loans, securities, mortgage
Lending Policies of Banks and FIs
Typical B/S of a Commercial Bank
? CAPITAL & LIABILITIES ? Paid up Capital ? Reserves & Surpluses ? Deposits (Demand & Time) and Other a/cs ? Borrowings from other Banks, Refinance from IDBI, SIDBI, NABARD, EXIM Bank, etc ? Other Liabilities ? Profit and Loss a/c ? TOTAL
Lending by Banks
? PROPERTY & ASSETS ? Cash / Bal with others ? Money at Call & at Short Notice ? Investments (incl SLR) ? Advances (Short, Medium and Long Term), BD, etc ? Premises, Furniture, Cars, Vehicles, etc ? Profit and Loss (if any) ? TOTAL
2
Commercial Banking
Business Planning & Performance Review System
?Growth plans and Business Levels ?Sector-wise sub-plans for next year ?Achievement of Targets like Priority Sector (SSI and Agri), Export Finance, etc ?Bottom Up and Top Down Approaches ?Weekly, Monthly MIS and Review Reports ?Quarterly Analysis and Mid-course actions
Lending by Banks Commercial Banking 3
RBI as a regulator…
?Announces Credit Policy in April every year ?Reviews Quarterly June, October and December ?Monitors through various reports ?Helps GOI to formulate Budget and Policies ?Advises Banks to follow its Guidelines ?Controls money supply, credit, forex, etc ?Prescribes certain exposure limits / rates of intt ?Priority Sector – Agriculture, SSI, Exporters etc
Lending by Banks Commercial Banking 4
General Principles of Banks
1. 2. 3. 4. 5. 6. 7. 8. Identification of Borrower Purpose of the Loan Quantum of Loan Period of Loan Source of Repayment Collateral Security Offered Appraisal / Sanction / Acceptance of Terms Documentation / Disbursement / Inspection…
Lending by Banks Commercial Banking 5
General Principles
?01. Identification of Borrower
?Track Record/Experience/ Educational or Professional Qualifications ?Type of Business Organisation ?Past performance ?3 Cs - Character, Capacity and Credit Worthiness
Lending by Banks Commercial Banking 6
General Principles ...
?02. Purpose of the Loan
?Is it for productive purpose ? ?Is it a legitimate activity ? ?Is it new venture or existing ? ?If existing - is it for expansion or
diversification ?
Lending by Banks
Commercial Banking
7
General Principles ...
?03. Quantum of Loan
?Is it need based ? ?It should be timely ?It should be with borrower’s stake/
margin (Varying between 5 to 25%) ?It should neither be over – financed nor under-financed
Lending by Banks Commercial Banking 8
General Principles ...
?04. Period of Loan
?Is it for short or long term ? ?Is it adequate by time ? ?Is it a renewal/ revival/
enhancement ? ?What are the chances of contingencies ?
Lending by Banks Commercial Banking
9
General Principles ...
?05 Source of Repayment ?
?Out of business/salary income ? ?Is it self-liquidating ie., a working capital
account ? Cash Credit – Hypothecation or Pledge (lock-n-key) facility? ?Out of sale of asset(s) financed or disposal of collateral security? ?Any other source of income like guarantor? ?Is it a bridge loan ?
Lending by Banks Commercial Banking 10
General Principles ...
?06.What is the Security offered ?
?Primary - stock, assets, etc
(Hypothecation, Pledge, etc ) ?Secondary -3rd party guarantee or charge on immoveable property ?
?(Type of Mortgage over Assets)
Lending by Banks Commercial Banking 11
General Principles ...
?07. Appraisal of Proposal / Sanction ?08. Convey Terms & conditions in writing ?09. Documentation
?Proper Documents ?Proper Stamps ?Complete in all respects ?Executed by all authorised signatories / Seal ?Charge recorded with ROC within 30 days
?10.Disbursement, Inspection, Insurance & follow up – asset verification, stock statements, recovery, renewal ... ... ...
Lending by Banks Commercial Banking 12
Types of Lending
?A. Fund based (Current & Fixed Assets)
?1. Overdrafts ?2. Cash Credits ?3. Bills Finance – Demand or Usance Bills ?4. Demand Loans ?5.Term Loans ?6. Other Loans - Car Loans, Consumer Durables,
Educational Loans, Housing Loans, Professionals Personal Loans, Credit Cards and so on ……
Lending by Banks
Commercial Banking
13
Types of lendings ...
?B. Non-Fund based (Fee based)
?Issue of Guarantees ?Issue of Letters of Credit ?Deferred Payments Guarantees
?C. Others
?Lease Finance ?Hire Purchase Finance
Lending by Banks Commercial Banking 14
01. Overdrafts
?Temporary facility ?Allowed against Current or CC A/c -
5-10% above available limit ?Simple Application & formalities ?High rate of Interest ?Clean or Secured against stocks, shares, and other assets
Lending by Banks Commercial Banking
15
02. Cash Credit A/c
?For Working Capital purpose ?Limit generally for 1 year ?To submit periodic Stock statements ?Depends on Operating Cycle, Turnover, Cash Budget or Projected Balance Sheet ?Simple Documentation - DP Note and Hypothecation/Pledge Agreements
Lending by Banks Commercial Banking 16
03.Bills Purchased
?Bills of Exchange drawn for Credit ?Demand Bills or Usance Bills
?D/A or D/P basis
?Limit for Negotiation or Discount ?Close monitoring required
Lending by Banks Commercial Banking 17
04. Demand Loans
?Repayable on Demand - secured loan ?Against pledge of Gold, Fixed Deposit, Stocks etc. ?Generally in installments - mly, qly, hly etc ?Gradually liquidated over a period ?DP Note and other documents obtained
Lending by Banks Commercial Banking 18
05.Term Loans
?For acquiring Fixed Assets ?Ascertain Project Report and Cost ?Tech. Feasibility & Economic Viability ?Income to be generated with Project ?Economic Life of the Asset ?Cash Flows from the Project ?Charge on Assets, low Rate of Intt
Lending by Banks Commercial Banking 19
Types of Bank Borrowers
1. 2. 3. 4. 5. 6. 7. 8. Individuals – Retail Banking Sole Proprietor Partnership firms Trust Accounts HUFs, Clubs, Societies Private Limited Companies Public Limited Companies Public Sector Undertakings, MNCs
Lending by Banks Commercial Banking 20
Types of Borrowers
?01. Individuals - Minors/Majors/Status
?Salary Slips/NOC/No Dues Certificate ?Proof of Residence/Tel or Electricity Bills ?Agreements / Signatures /Witnesses/Security
?02. Sole Proprietor
?Certified Business Accounts/ Income Tax or
Sales Tax Assessment Orders etc
Commercial Banking
Lending by Banks
21
Types of Borrowers ...
?03. Partnership Firms
?Oral or Written Deed ? ?Registered or Unregistered Firm? ?Joint and Several responsibility of
Partners ?Certified Accounts ?Income Tax and Sales Tax assessments
Lending by Banks Commercial Banking
22
04.Trust A/cs
?Trust Deed - whether registered ? ?Capacity to raise loans ? ?Purpose of Loan ? ?Signatory to the Documents ? ?Legal Opinion on Transaction ? ?Resolution has been passed ? ?Creation of Charge on Assets ?
Lending by Banks Commercial Banking 23
05. HUFs, Clubs, Societies, Assns etc
?Karta of the Family & Co-parceners ?Clubs, Societies and Associations
? Office bearers ? Rules, Articles, ? Authorised persons
?Local Bodies : Panchayat or
Municipality
Lending by Banks
Commercial Banking
24
06.Pvt Ltd Cos & PSUs
?Same set of terms and conditions as
Public Limited Companies. ?In case of PSUs, Guarantee may be issued by the State or Central Governments ! ?In some cases, Margin Money and /or State / Central Government Subsidy ! ?In large accounts - Consortium ?
Lending by Banks Commercial Banking 25
07. Public Limited Cos
?Cert of Incorporation by ROC : Cos. Act ?Memorandum of Association : Objectives ?Articles of Association : Working of Co. ?Cert for Commencement of Business ?List of Directors, Share Holding pattern ?Powers of Directors, Common Seal etc ?Resolution by the Board for Loan ?Signatory to Documents,Charge on Assets
Lending by Banks Commercial Banking 26
Securities for Bank Advances
Creation of various types of charges
Lending by Banks
Commercial Banking
27
FORMS OF SECURITY FOR LOANS
1. BANKERS’ LIEN 2. PLEDGE 3. HYPOTHECATION 4. MORTGAGE
Lending by Banks Commercial Banking 28
1. BANKER’S LIEN
?A RIGHT TO RETAIN PROPERTIES ?BELONGING TO THE DEBTOR ?UNTIL DUES ARE PAID FULLY
Lending by Banks
Commercial Banking
29
2. PLEDGE
?IT IS BAILMENT OF GOODS ?PURPOSE OF SECURITY
?FOR PAYMENT OF A DEBT OR PERFORMANCE OF A PROMISE
Lending by Banks
Commercial Banking
30
PLEDGE
…………….contd…..
?IT IS NOT A RIGHT OF OWNERSHIP ?LENDER CAN ONLY RETAIN POSSESSION ?NOT A TRANSFER OF PROPERTY ?PLEDGEE TO TAKE PRUDENT CARE OF ASSETS
Lending by Banks
Commercial Banking
31
PLEDGE ………………… contd..
? Exceptions
1. 2. 3. 4. 5. 6. AGENT CAN ALSO CREATE A VALID PLEDGE SELLER IN POSSESSION MAY CREATE BUYER IN POSSESSION BEFORE PAYMENT PLEDGER WITH LIMITED INTEREST ONE OF THE JOINT OWNERS IN POSSESSION ANY PERSON WHO IS IN VALID POSSESSION
Lending by Banks
Commercial Banking
32
PLEDGE …………….contd..
? BANKER’S RIGHTS AS PLEDGEE
1. CAN FILE A SUIT FOR RECOVERY OF DUES 2. CAN FILE A SUIT FOR SALE OF GOODS PLEDGED 3. CAN SELL THE GOODS AFTER DUE NOTICE
Lending by Banks
Commercial Banking
33
PLEDGE …………….contd..
? BANKER’S OBLIGATIONS
1. NOT ENTITLED TO ENJOY ANY ACCRETIONS 2. GOVT AUTHORITIES MAY NOT SUPERSEDE THE PLEDGEE’S RIGHTS FOR RECOVERY OF DUES 3. REASONABLE NOTICE TO BE GIVEN BEFORE SALE 4. TO RE-DELIVER THE GOODS ON RECEIPT OF DUES 5. PROPER REGISTRATION WITH REGISTRAR
Lending by Banks Commercial Banking 34
3. HYPOTHECATION
?IT’S A MORTGAGE OF MOVEABLE ASSETS ?A TEMPORARY TRANSFER OF PROPERTY ?NO TRANSFER OF POSSESSION BY THE HYPOTHECATOR TO HYPOTHECATEE ?PROPER RECORD OF CHARGE CREATION TO BE DONE WITH REGISTRAR OF COMPANIES ?HYPOTHECATOR FREE TO USE THE ASSETS
Lending by Banks
Commercial Banking
35
MORTGAGE - PARTIES
?MORTGAGOR - THE BORROWER ?MORTGAGEE - THE LENDER/BANKER ?REGISTRAR OF ASSURANCES (FOR ASSET) ?REGISTRAR OF COMPANIES (FOR CHARGES)
Lending by Banks
Commercial Banking
36
MORTGAGE ……..contd..
?A TRANSFER OF INTEREST IN IMMOVEABLE ASSETS LIKE LAND, BUILDING, PLANT, M/c., ?IMMOVEABLE PROPERTY TO BE SPECIFIC ?CONSIDERATION MAY BE MONEY ADVANCED/ TO BE ADVANCED OR PERFORMING A PROMISE
Lending by Banks
Commercial Banking
37
TYPES OF MORTGAGES…..
1. 2. 3. 4. SIMPLE MORTGAGE MORTGAGE BY CONDITIONAL SALE USUFRUCTUARY MORTGAGE ENGLISH MORTGAGE : (REGISTERED ) 5. EQUITABLE MORTGAGE : BY DEPOSIT OF TITLE DEEDS 6. ANOMALOUS MORTGAGE
Lending by Banks Commercial Banking 38
SIMPLE MORTGAGE
?NO DELIVERY OF POSSESSION OF ASSETS ?MORTGAGOR BINDS PERSONALLY FOR DUES ?AGREES TO LENDER’S RIGHT TO DISPOSE OFF THE MORTGAGED PROPERTY FOR LIQUIDATING THE DUES
Lending by Banks Commercial Banking 39
MORTGAGE BY CONDITIONAL SALE
?MORTGAGOR SELLS THE PROPERTY TO LENDER ?CONDITIONS THAT ON DEFAULT, SALE SHALL BECOME ABSOLUTE ?ON PAYMENTS MADE, SALE SHALL BE VOID ?ALSO, ON RECEIPT OF PAYMENT, BUYER SHALL TRANSFER BACK THE PROPERTY TO THE SELLER
Lending by Banks Commercial Banking 40
USUFRUCTUARY MORTGAGE
?POSSESSION IS DELIVERED TO MORTGAGEE ?MORTGAGOR IS ENTITLED TO RE-POSSESS ON PAYMENT OF DUES OR DEBT IS DISCHARGED BY RENTS AND PROFITS RECEIVED BY MG’GEE ?MG’GEE IS ENTITLED TO ENJOY THE PROPERTY TILL DEBT IS DISCHARGED ?MORTGAGEE CANNOT SUE MORTGAGOR FOR FORECLOSURE OR FOR SALE.
Lending by Banks Commercial Banking 41
ENGLISH MORTGAGE (REGISTERED)
?IT’S A TRANSFER OF PROPERTY TO MORTGAGEE ?FOR A DEBT OR PROMISE TO BE PERFORMED ?MG’GEE SHALL RE-TRANSFER THE PROPERTY UPON PAYMENT OF DUES OR DISCHARGE OF PROMISE
Lending by Banks Commercial Banking 42
ENGLISH MORTGAGE contd..
?MORTGAGE DEED TO BE REGISTERED WITH THE REGISTRAR OF ASSURANCES ?INVOLVES HEAVY STAMP DUTY FOR THE DEED ?PRIOR ENCUMBERANCES TO BE ASCERTAINED ?LEGAL FORMALITIES TO BE COMPLIED WITH ?R.O.C. TO BE INFORMED WITHIN 30 DAYS THRO FORM Nos. 8 AND 13 (AS PER COMPANIES ACT)
Lending by Banks Commercial Banking 43
EQUITABLE MORTGAGE
?TRANSFER OF IMMOVEABLE PROPERTY ?FOR A CONSIDERATION - DEBT OR PROMISE ?BY DEPOSIT OF TITLE DEEDS ONLY ?WITH AN INTENT TO CREATE CHARGE ON ASSETS ?SIMPLE - NO REGISTRATION WITH REGISTRAR OF ASSURANCES ?LEGAL STEPS TO BE PROPERLY OBSERVED ?R.O.C. TO BE ADVISED AS IN ENGLISH MGGE’
Lending by Banks Commercial Banking 44
ANOMALOUS MORTGAGE
?NOT ANY OF THE ABOVE 5 TYPES OF MORTGAGES ?A COMBINATION OF 2 OR MORE OF THE ABOVE
Lending by Banks
Commercial Banking
45
MORTGAGES Miscellaneous…
?Encumberances to be verfied properly ?Stamping of Documents to be proper ?Appropriate documents to be obtained ?Authorised persons only to create ?Record of Dates to be observed in case of second charge, pari-passu charge ?NOCs to be obtained properly ?Valuation of Properties to be proper
Lending by Banks Commercial Banking 46
SECURITIES FOR ADVANCES Other issues
?Records to be maintained properly ?Stock Inspections to be done regularly ?Indication Boards to be insisted upon ?Insurance of Assets to be regular ?Renewal /Enhancement of limits to be done periodically ?Revival Letters to be obtained ?Acknowledgement of Debts ?Proper End-use and follow up to be done
Lending by Banks Commercial Banking 47
doc_663779808.ppt
This is a PPT about balance sheets of a bank, Performance Review System, RBI as a regulator, types of banks, borrowers, loans, securities, mortgage
Lending Policies of Banks and FIs
Typical B/S of a Commercial Bank
? CAPITAL & LIABILITIES ? Paid up Capital ? Reserves & Surpluses ? Deposits (Demand & Time) and Other a/cs ? Borrowings from other Banks, Refinance from IDBI, SIDBI, NABARD, EXIM Bank, etc ? Other Liabilities ? Profit and Loss a/c ? TOTAL
Lending by Banks
? PROPERTY & ASSETS ? Cash / Bal with others ? Money at Call & at Short Notice ? Investments (incl SLR) ? Advances (Short, Medium and Long Term), BD, etc ? Premises, Furniture, Cars, Vehicles, etc ? Profit and Loss (if any) ? TOTAL
2
Commercial Banking
Business Planning & Performance Review System
?Growth plans and Business Levels ?Sector-wise sub-plans for next year ?Achievement of Targets like Priority Sector (SSI and Agri), Export Finance, etc ?Bottom Up and Top Down Approaches ?Weekly, Monthly MIS and Review Reports ?Quarterly Analysis and Mid-course actions
Lending by Banks Commercial Banking 3
RBI as a regulator…
?Announces Credit Policy in April every year ?Reviews Quarterly June, October and December ?Monitors through various reports ?Helps GOI to formulate Budget and Policies ?Advises Banks to follow its Guidelines ?Controls money supply, credit, forex, etc ?Prescribes certain exposure limits / rates of intt ?Priority Sector – Agriculture, SSI, Exporters etc
Lending by Banks Commercial Banking 4
General Principles of Banks
1. 2. 3. 4. 5. 6. 7. 8. Identification of Borrower Purpose of the Loan Quantum of Loan Period of Loan Source of Repayment Collateral Security Offered Appraisal / Sanction / Acceptance of Terms Documentation / Disbursement / Inspection…
Lending by Banks Commercial Banking 5
General Principles
?01. Identification of Borrower
?Track Record/Experience/ Educational or Professional Qualifications ?Type of Business Organisation ?Past performance ?3 Cs - Character, Capacity and Credit Worthiness
Lending by Banks Commercial Banking 6
General Principles ...
?02. Purpose of the Loan
?Is it for productive purpose ? ?Is it a legitimate activity ? ?Is it new venture or existing ? ?If existing - is it for expansion or
diversification ?
Lending by Banks
Commercial Banking
7
General Principles ...
?03. Quantum of Loan
?Is it need based ? ?It should be timely ?It should be with borrower’s stake/
margin (Varying between 5 to 25%) ?It should neither be over – financed nor under-financed
Lending by Banks Commercial Banking 8
General Principles ...
?04. Period of Loan
?Is it for short or long term ? ?Is it adequate by time ? ?Is it a renewal/ revival/
enhancement ? ?What are the chances of contingencies ?
Lending by Banks Commercial Banking
9
General Principles ...
?05 Source of Repayment ?
?Out of business/salary income ? ?Is it self-liquidating ie., a working capital
account ? Cash Credit – Hypothecation or Pledge (lock-n-key) facility? ?Out of sale of asset(s) financed or disposal of collateral security? ?Any other source of income like guarantor? ?Is it a bridge loan ?
Lending by Banks Commercial Banking 10
General Principles ...
?06.What is the Security offered ?
?Primary - stock, assets, etc
(Hypothecation, Pledge, etc ) ?Secondary -3rd party guarantee or charge on immoveable property ?
?(Type of Mortgage over Assets)
Lending by Banks Commercial Banking 11
General Principles ...
?07. Appraisal of Proposal / Sanction ?08. Convey Terms & conditions in writing ?09. Documentation
?Proper Documents ?Proper Stamps ?Complete in all respects ?Executed by all authorised signatories / Seal ?Charge recorded with ROC within 30 days
?10.Disbursement, Inspection, Insurance & follow up – asset verification, stock statements, recovery, renewal ... ... ...
Lending by Banks Commercial Banking 12
Types of Lending
?A. Fund based (Current & Fixed Assets)
?1. Overdrafts ?2. Cash Credits ?3. Bills Finance – Demand or Usance Bills ?4. Demand Loans ?5.Term Loans ?6. Other Loans - Car Loans, Consumer Durables,
Educational Loans, Housing Loans, Professionals Personal Loans, Credit Cards and so on ……
Lending by Banks
Commercial Banking
13
Types of lendings ...
?B. Non-Fund based (Fee based)
?Issue of Guarantees ?Issue of Letters of Credit ?Deferred Payments Guarantees
?C. Others
?Lease Finance ?Hire Purchase Finance
Lending by Banks Commercial Banking 14
01. Overdrafts
?Temporary facility ?Allowed against Current or CC A/c -
5-10% above available limit ?Simple Application & formalities ?High rate of Interest ?Clean or Secured against stocks, shares, and other assets
Lending by Banks Commercial Banking
15
02. Cash Credit A/c
?For Working Capital purpose ?Limit generally for 1 year ?To submit periodic Stock statements ?Depends on Operating Cycle, Turnover, Cash Budget or Projected Balance Sheet ?Simple Documentation - DP Note and Hypothecation/Pledge Agreements
Lending by Banks Commercial Banking 16
03.Bills Purchased
?Bills of Exchange drawn for Credit ?Demand Bills or Usance Bills
?D/A or D/P basis
?Limit for Negotiation or Discount ?Close monitoring required
Lending by Banks Commercial Banking 17
04. Demand Loans
?Repayable on Demand - secured loan ?Against pledge of Gold, Fixed Deposit, Stocks etc. ?Generally in installments - mly, qly, hly etc ?Gradually liquidated over a period ?DP Note and other documents obtained
Lending by Banks Commercial Banking 18
05.Term Loans
?For acquiring Fixed Assets ?Ascertain Project Report and Cost ?Tech. Feasibility & Economic Viability ?Income to be generated with Project ?Economic Life of the Asset ?Cash Flows from the Project ?Charge on Assets, low Rate of Intt
Lending by Banks Commercial Banking 19
Types of Bank Borrowers
1. 2. 3. 4. 5. 6. 7. 8. Individuals – Retail Banking Sole Proprietor Partnership firms Trust Accounts HUFs, Clubs, Societies Private Limited Companies Public Limited Companies Public Sector Undertakings, MNCs
Lending by Banks Commercial Banking 20
Types of Borrowers
?01. Individuals - Minors/Majors/Status
?Salary Slips/NOC/No Dues Certificate ?Proof of Residence/Tel or Electricity Bills ?Agreements / Signatures /Witnesses/Security
?02. Sole Proprietor
?Certified Business Accounts/ Income Tax or
Sales Tax Assessment Orders etc
Commercial Banking
Lending by Banks
21
Types of Borrowers ...
?03. Partnership Firms
?Oral or Written Deed ? ?Registered or Unregistered Firm? ?Joint and Several responsibility of
Partners ?Certified Accounts ?Income Tax and Sales Tax assessments
Lending by Banks Commercial Banking
22
04.Trust A/cs
?Trust Deed - whether registered ? ?Capacity to raise loans ? ?Purpose of Loan ? ?Signatory to the Documents ? ?Legal Opinion on Transaction ? ?Resolution has been passed ? ?Creation of Charge on Assets ?
Lending by Banks Commercial Banking 23
05. HUFs, Clubs, Societies, Assns etc
?Karta of the Family & Co-parceners ?Clubs, Societies and Associations
? Office bearers ? Rules, Articles, ? Authorised persons
?Local Bodies : Panchayat or
Municipality
Lending by Banks
Commercial Banking
24
06.Pvt Ltd Cos & PSUs
?Same set of terms and conditions as
Public Limited Companies. ?In case of PSUs, Guarantee may be issued by the State or Central Governments ! ?In some cases, Margin Money and /or State / Central Government Subsidy ! ?In large accounts - Consortium ?
Lending by Banks Commercial Banking 25
07. Public Limited Cos
?Cert of Incorporation by ROC : Cos. Act ?Memorandum of Association : Objectives ?Articles of Association : Working of Co. ?Cert for Commencement of Business ?List of Directors, Share Holding pattern ?Powers of Directors, Common Seal etc ?Resolution by the Board for Loan ?Signatory to Documents,Charge on Assets
Lending by Banks Commercial Banking 26
Securities for Bank Advances
Creation of various types of charges
Lending by Banks
Commercial Banking
27
FORMS OF SECURITY FOR LOANS
1. BANKERS’ LIEN 2. PLEDGE 3. HYPOTHECATION 4. MORTGAGE
Lending by Banks Commercial Banking 28
1. BANKER’S LIEN
?A RIGHT TO RETAIN PROPERTIES ?BELONGING TO THE DEBTOR ?UNTIL DUES ARE PAID FULLY
Lending by Banks
Commercial Banking
29
2. PLEDGE
?IT IS BAILMENT OF GOODS ?PURPOSE OF SECURITY
?FOR PAYMENT OF A DEBT OR PERFORMANCE OF A PROMISE
Lending by Banks
Commercial Banking
30
PLEDGE
…………….contd…..
?IT IS NOT A RIGHT OF OWNERSHIP ?LENDER CAN ONLY RETAIN POSSESSION ?NOT A TRANSFER OF PROPERTY ?PLEDGEE TO TAKE PRUDENT CARE OF ASSETS
Lending by Banks
Commercial Banking
31
PLEDGE ………………… contd..
? Exceptions
1. 2. 3. 4. 5. 6. AGENT CAN ALSO CREATE A VALID PLEDGE SELLER IN POSSESSION MAY CREATE BUYER IN POSSESSION BEFORE PAYMENT PLEDGER WITH LIMITED INTEREST ONE OF THE JOINT OWNERS IN POSSESSION ANY PERSON WHO IS IN VALID POSSESSION
Lending by Banks
Commercial Banking
32
PLEDGE …………….contd..
? BANKER’S RIGHTS AS PLEDGEE
1. CAN FILE A SUIT FOR RECOVERY OF DUES 2. CAN FILE A SUIT FOR SALE OF GOODS PLEDGED 3. CAN SELL THE GOODS AFTER DUE NOTICE
Lending by Banks
Commercial Banking
33
PLEDGE …………….contd..
? BANKER’S OBLIGATIONS
1. NOT ENTITLED TO ENJOY ANY ACCRETIONS 2. GOVT AUTHORITIES MAY NOT SUPERSEDE THE PLEDGEE’S RIGHTS FOR RECOVERY OF DUES 3. REASONABLE NOTICE TO BE GIVEN BEFORE SALE 4. TO RE-DELIVER THE GOODS ON RECEIPT OF DUES 5. PROPER REGISTRATION WITH REGISTRAR
Lending by Banks Commercial Banking 34
3. HYPOTHECATION
?IT’S A MORTGAGE OF MOVEABLE ASSETS ?A TEMPORARY TRANSFER OF PROPERTY ?NO TRANSFER OF POSSESSION BY THE HYPOTHECATOR TO HYPOTHECATEE ?PROPER RECORD OF CHARGE CREATION TO BE DONE WITH REGISTRAR OF COMPANIES ?HYPOTHECATOR FREE TO USE THE ASSETS
Lending by Banks
Commercial Banking
35
MORTGAGE - PARTIES
?MORTGAGOR - THE BORROWER ?MORTGAGEE - THE LENDER/BANKER ?REGISTRAR OF ASSURANCES (FOR ASSET) ?REGISTRAR OF COMPANIES (FOR CHARGES)
Lending by Banks
Commercial Banking
36
MORTGAGE ……..contd..
?A TRANSFER OF INTEREST IN IMMOVEABLE ASSETS LIKE LAND, BUILDING, PLANT, M/c., ?IMMOVEABLE PROPERTY TO BE SPECIFIC ?CONSIDERATION MAY BE MONEY ADVANCED/ TO BE ADVANCED OR PERFORMING A PROMISE
Lending by Banks
Commercial Banking
37
TYPES OF MORTGAGES…..
1. 2. 3. 4. SIMPLE MORTGAGE MORTGAGE BY CONDITIONAL SALE USUFRUCTUARY MORTGAGE ENGLISH MORTGAGE : (REGISTERED ) 5. EQUITABLE MORTGAGE : BY DEPOSIT OF TITLE DEEDS 6. ANOMALOUS MORTGAGE
Lending by Banks Commercial Banking 38
SIMPLE MORTGAGE
?NO DELIVERY OF POSSESSION OF ASSETS ?MORTGAGOR BINDS PERSONALLY FOR DUES ?AGREES TO LENDER’S RIGHT TO DISPOSE OFF THE MORTGAGED PROPERTY FOR LIQUIDATING THE DUES
Lending by Banks Commercial Banking 39
MORTGAGE BY CONDITIONAL SALE
?MORTGAGOR SELLS THE PROPERTY TO LENDER ?CONDITIONS THAT ON DEFAULT, SALE SHALL BECOME ABSOLUTE ?ON PAYMENTS MADE, SALE SHALL BE VOID ?ALSO, ON RECEIPT OF PAYMENT, BUYER SHALL TRANSFER BACK THE PROPERTY TO THE SELLER
Lending by Banks Commercial Banking 40
USUFRUCTUARY MORTGAGE
?POSSESSION IS DELIVERED TO MORTGAGEE ?MORTGAGOR IS ENTITLED TO RE-POSSESS ON PAYMENT OF DUES OR DEBT IS DISCHARGED BY RENTS AND PROFITS RECEIVED BY MG’GEE ?MG’GEE IS ENTITLED TO ENJOY THE PROPERTY TILL DEBT IS DISCHARGED ?MORTGAGEE CANNOT SUE MORTGAGOR FOR FORECLOSURE OR FOR SALE.
Lending by Banks Commercial Banking 41
ENGLISH MORTGAGE (REGISTERED)
?IT’S A TRANSFER OF PROPERTY TO MORTGAGEE ?FOR A DEBT OR PROMISE TO BE PERFORMED ?MG’GEE SHALL RE-TRANSFER THE PROPERTY UPON PAYMENT OF DUES OR DISCHARGE OF PROMISE
Lending by Banks Commercial Banking 42
ENGLISH MORTGAGE contd..
?MORTGAGE DEED TO BE REGISTERED WITH THE REGISTRAR OF ASSURANCES ?INVOLVES HEAVY STAMP DUTY FOR THE DEED ?PRIOR ENCUMBERANCES TO BE ASCERTAINED ?LEGAL FORMALITIES TO BE COMPLIED WITH ?R.O.C. TO BE INFORMED WITHIN 30 DAYS THRO FORM Nos. 8 AND 13 (AS PER COMPANIES ACT)
Lending by Banks Commercial Banking 43
EQUITABLE MORTGAGE
?TRANSFER OF IMMOVEABLE PROPERTY ?FOR A CONSIDERATION - DEBT OR PROMISE ?BY DEPOSIT OF TITLE DEEDS ONLY ?WITH AN INTENT TO CREATE CHARGE ON ASSETS ?SIMPLE - NO REGISTRATION WITH REGISTRAR OF ASSURANCES ?LEGAL STEPS TO BE PROPERLY OBSERVED ?R.O.C. TO BE ADVISED AS IN ENGLISH MGGE’
Lending by Banks Commercial Banking 44
ANOMALOUS MORTGAGE
?NOT ANY OF THE ABOVE 5 TYPES OF MORTGAGES ?A COMBINATION OF 2 OR MORE OF THE ABOVE
Lending by Banks
Commercial Banking
45
MORTGAGES Miscellaneous…
?Encumberances to be verfied properly ?Stamping of Documents to be proper ?Appropriate documents to be obtained ?Authorised persons only to create ?Record of Dates to be observed in case of second charge, pari-passu charge ?NOCs to be obtained properly ?Valuation of Properties to be proper
Lending by Banks Commercial Banking 46
SECURITIES FOR ADVANCES Other issues
?Records to be maintained properly ?Stock Inspections to be done regularly ?Indication Boards to be insisted upon ?Insurance of Assets to be regular ?Renewal /Enhancement of limits to be done periodically ?Revival Letters to be obtained ?Acknowledgement of Debts ?Proper End-use and follow up to be done
Lending by Banks Commercial Banking 47
doc_663779808.ppt