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Types of Collaterals and Their Characteristics
What is Collateral?
is the fall-back asset a banker takes alongside (or in lieu of) the primary security so that, if the borrower defaults, recovery is not left to the mercy of unsecured civil litigation.
(a) — Document / Why It Is Called For?
Document: All material documents of title (Sale Deed / Gift Deed / Partition Deed / Conveyance Deed); Why It Is Called For: To establish ownership in the mortgagor
(b) — Document / Why It Is Called For?
Document: Parent documents for the prescribed period — many banks insist on a 30-year chain; Why It Is Called For: To trace flow of title and rule out defective transfer in the chain
(c) — Document / Why It Is Called For?
Document: Non-Encumbrance Certificate (NEC) — normally for 13 years; Why It Is Called For: To verify no subsisting charge / lien on the property
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