SECURITIES FOR ADVANCES
Types of Advances
FUNDED
o OVERDRAFT
o ALL TYPES OF LOANS
o CHEQUE PURCHASE
o BILLS PURCHASE
o LEASES
o CREDIT CARDS
NON FUNDED
o GUARANTEES
o LETTERS OF CREDIT (SIGHT / USANCE)
WHAT ARE THE IMPLICATIONS WHICH MAY ARISE
UNABLE TO PAY
o OVERDRAFT
o LOANS
o LEASES
o CREDIT CARDS
DISHONOURED
o
CHEQUES PURCHASED
o
BILLS DISCOUNTED
o
UNABLE TO SETTLE CLAIM
o GUARANTEES
UNABLE TO RETIRE DOCS
o LETTERS OF CREDIT
WHAT IS SECURITY………??
SECOND MODE OF REPAYMENT
A FALL BACK SITUATION
CHARACTERISTICS OF SECURITY
EASY TO ACCESS
EASY TO IDENTIFY THE TITLE
EASY TO OBTAIN
EASY TO REALIZE
STABLE IN VALUE
POINTS TO NOTE WHEN OBTAINING
SECURITY DOCUMENTS
Title
Authority
Value
Easy to realize
Identity & accessibility
Formalities
Proper title / without defects
Any other party having a right (get a charge over it.)
Are we getting all rights over the asset
Free of all encumbrances
AUTHORITY
Does he have authority to charge the asset.
In what capacity
VALUE
Is the value adequate
What will be the value in a forced sale
Is it stable over time
EASY TO REALIZE
How easy is it to realize
Cost of realization (financial , image of the bank)
Time taken to realize
Any other obstacle
IDENTITY & ACCESSIBILITY
Easy to identify / Locate
Easy access to security
FORMALITIES
Proper documentation & legal formalities
Prior notice to various authorities
Registration requirements
Periodic inspections
Insurance
PRIMARY & SECONDARY
SECURITY
PRIMARY SECURITY
The security you rely most.
SECONDARY SECURITY
The other supporting documents which cover incidence typical to the type
of facility
MOST COMMON PRIMARY SECURITY
CASH
LIFE INSURANCE POLICIES
SHARES
ABSOLUTE OWNERSHIP OF VEHICLES
MORTGAGES
– Property
– Stocks
– Vehicles
– Book debts
– Machinery
SECONDARY SECURITY DOCUMENTS
DEMAND PRO NOTES
FACILITY AGREEMENT FORMS
TERM LOAN AGREEMENT
OVERDRAFT AGREEMENT
GUARANTEE BONDS
INDEMNITIES
GENERAL SECURITY AGREEMENT
SERIES OF LOANS
PLEDGE LOAN AGREEMENT
Please Note……….
Some times secondary
security docs are considered as primary security
For PAL Loans
TODs…..etc…..
Primary Securities
CASH
SET- OFF
3rd PARTY SET-OFF/GUARANTEE
OTHER DOCS FOR THE FACILITY
LIFE INSURANCE
ORIGINAL POLICY
– Age Admitted
– Any Beneficiaries
ASSIGNMENT OVER POLICY * 3
DOCS FOR THE FACILITY
SHARES
SHARES TO BE LODGE IN SLACH A/C
SHARE TRANSFER FORMS
IRREVOCABLE POWER OF ATTORNEY
o ( To be registered at The Registrar General )
MORTGAGE OVER SHARES
o ( To be registered at The Land Registry. If the borrower is a Limited Liability Co.. The Document Should be registered in The Land Registry & The Registrar of Companies.)
OTHER DOCS FOR THE FACILITY
MORTGAGES
MORTGAGE OVER PROPERTY-NOTARIALLY EXECUTED
OTHERS -EXECUTED IN THE BANK
– Internal formatted Documents are used for this purpose
Mortgage over vehicles
Mortgage over stocks/Book Debts (Affidavit to be obtained )
Mortgage over machinery
Sanjeeva Pieris
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