TYPES OF COLLATERAL
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Principles and Practices of Banking — JAIIB.
One-liners from this chapter
Free sample — 8 of 66 rapid-fire Q&A cards.
What is collateral in the context of bank lending?
Collateral is an asset or property pledged by a borrower to a lender as security for a loan, which the lender can seize and sell if the borrower defaults on repayment.
What is the meaning of the term 'tangible collateral' in banking?
Physical assets like property, gold, or machinery pledged as security.
What is the difference between primary security and collateral security?
Primary security is the asset directly created out of the bank credit (e.g., stock purchased with the loan), whereas collateral security is an additional asset provided to cover any shortfall in recovery.
What is an intangible collateral in the context of secured lending?
Non-physical assets like goodwill, patents, or receivables used as security.
What type of collateral is considered immovable property?
Immovable property includes land, buildings, and other structures permanently attached to the earth, and it is commonly used as mortgage security in bank lending.
What is the difference between collateral and a guarantee as security?
Collateral is an asset; guarantee is a personal promise to repay.
What is a mortgage in banking parlance?
A mortgage is the transfer of an interest in immovable property to secure a loan, giving the lender the right to sell the property if the borrower fails to repay.
What is a corporate guarantee as collateral security?
A company's promise to repay borrower's debt if borrower defaults.
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