JAIIB · PPB

DIFFERENT MODES OF CHARGING SECURITIES

Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Principles and Practices of Banking — JAIIB.

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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

Under which Act is pledge governed in India?

Pledge is governed by Sections 172 to 179 of the Indian Contract Act, 1872. These sections define the rights and duties of both the pledgor and the pledgee.

What is the minimum amount of a mortgage deed that requires compulsory registration?

Mortgages above Rs. 100 require compulsory registration

What is a 'hypothecation' as a mode of charging security?

Hypothecation is a charge on movable assets where possession remains with the borrower but the lender has a right over the assets in case of default. It is commonly used for vehicles, stock-in-trade, and book debts.

What is an 'anomalous mortgage' under the Transfer of Property Act?

A mortgage not falling under any of the five defined types

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