Questions on Credit
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What are the two types of Lien? Explain.
Particular lien and general lien are the two types of lien.

  • Particular lien gives right to retain the goods for a particular or specific dues from the borrower and not for other dues from him. It is also known as ordinary lien.
  • General lien is the right to retain the goods and securities belonging to the debtor for all the dues payable by him. Banker’s lien is a general lien, exceptional and it is an implied pledge

What is negative lien?

The undertaking given by a borrower not to create any charge on his unencumbered securities without the prior permission from the lender/bank is called negative lien. A letter of negative lien is only an undertaking and it does not create any charge on the assets of the borrower

Title deeds Cover

The following details should be clearly noted on the face of the cover:

  • Name of the title holder
  • Details of the property
  • Date of creation of charge
  • Name of the borrower with loan account number(s)
  • Correspondence file No. of the borrower account
  • The originals of ECs / Tax receipts must be kept in title deeds cover

Title deeds Release

  • The title deeds are to be released only after obtaining the prior permission from the concerned sanctioning authority.
  • Before handing over the title deeds/documents, branches have to get themselves fully satisfied that there is/are no direct/indirect liability/ies to the bank from the borrower/ guarantor.
  • In case of death of the mortgagor, the title deeds are to be returned only to the legal heirs of the deceased jointly after getting the approval by submitting the claim application to the appropriate authorities concerned.

Drawing Power for OCC against Stocks and Book Debts

  • Operations in the Open Cash Credit account should be permitted only up to the sanctioned limit or the Drawing Power (DP) whichever is less.
  • Obtain monthly stock/book debts statement before the prescribed date of succeeding month.
  • Ensure and verify that the stock statement contains the details of all types of stocks in the possession of the borrower.
  • The book debts/receivables statement should contain the age-wise classification of debtors/receivables since only the debts below the tenure stipulated in the sanction letter are to be considered for arriving the DP

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