Security required in bank finance, Financial Management

Assignment Help:

Q. Security Required in Bank Finance?

1) Hypothecation: Under this arrangement, the borrower is provided with working capital finance by the bank against the security of movable property, generally inventories. The borrower does not transfer the property to the bank; he remains in the possession of property made available as security for the debt thus, hypothecation is a charge against property for an amount of debt where neither ownership nor possessions passed to the creditor. Banks generally grant credit against hypothecation only to first class customers with highest integrity. They do not usually grant hypothecation facility to new borrowers.

2) Pledge: Under this arrangement, the borrower is required to transfer the physical possession of the property offered as a security to the bank to obtain!", credit. The bank has a right of lien and can retain possession of the goods pledged unless payment of the principal, interest and any other expenses is made. In case of default, the bank may either (a) sue the borrower for the amount due, or (b) sue for the sale of goods pledged, or (c) after giving due notice sell the goods.

3) Mortgage: Mortgage is the transfer of a legal or equitable ‘interest in a specific immovable property for the payment of a debt, in case of mortgage, the possession of the property may remain with the borrower with the lender getting the full legal title. The transferor or of interest (borrower) is called the mortgagor, the transferee (bank) is called the mortgagee, and the instrument of transfer is called the mortgage deed.

4) Lien: Lien means right of the lender to retain property belonging to the borrower until he repays credit. It can be either a particular lien or general lien. Particular lien is a right to retain property until the claim associated with the property is fully paid. Generally lien, on the other hand, is applicable till all dues of the lender ar~ paid. Banks usually enjoy general lien.


Related Discussions:- Security required in bank finance

What do you meant by negative externalities, Question 1: i) Is ther...

Question 1: i) Is there a stable and inverse link between unemployment and inflation? ii) The government announces that expansionary policies will be enacted in a view

What is installment credit, Q. What is Installment Credit? This is anot...

Q. What is Installment Credit? This is another method by which the assets are purchased and the possession of goods is taken immediately but the payment is made in installments

prepare a cash budget, You are presented with the budgeted data shown belo...

You are presented with the budgeted data shown below for the period November 20X1 to June 20X2 by your firm. It has been extracted from the other functional budgets that have been

Activity-based costing - abc, An accounting technique that identifies the a...

An accounting technique that identifies the activities that a firm does, and then allocates indirect costs to products. An activity based costing (ABC) system finds the relationshi

Finance company vital role in investment intermediaries, How is the finance...

How is the finance company play a vital role in investment intermediaries? Finance companies: Finance companies make loans to corporations and individuals by giving consu

Tests in investments, Tests in Investments There are many rules that sp...

Tests in Investments There are many rules that specify how the past data of share prices can be used to obtain a clue regarding the future prices of shares. Such rules would be

Explain the various source of finance, Explain in detail various sources of...

Explain in detail various sources of finance. Which is the most appropriate one?

Determine about the zero interest bonds, Determine about the Zero Interest ...

Determine about the Zero Interest Bonds (ZIBs) Very much alike DDBs, only crucial difference is that these are issued at face values (DDBs are issued at a discount to face valu

Residual income, Residual Income This is used for external reporting pu...

Residual Income This is used for external reporting purposes. This term refers to the net income which is available for distribution to the firm's common stock holders. In mana

Significant performance indicators, Significant Performance Indicators ...

Significant Performance Indicators   Following are the most commonly used performance indicators used to assess the financial, and general health of any company:   Gro

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd