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DIFFERENT MODES OF CHARGING SECURITIES
What does 'charge' mean in the context of bank lending?
A charge is a legal right created by a borrower in favour of a lender over an asset as security for repayment of a loan. It gives the lender the right to recover dues by selling the charged asset in case of default.
What is the legal basis for a bank to create a charge over borrower's assets?
Contractual agreement between borrower and lender bank
What is a 'pledge' as a mode of charging security?
Pledge is the bailment of goods as security for payment of a debt, where the pledgee (lender) takes actual possession of the goods. The pledgee can sell the goods without court intervention upon default by the pledgor (borrower).
Which section of the Indian Contract Act, 1872 governs pledge?
Sections 172 to 179 of the Indian Contract Act, 1872
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