Thursday, 2 January 2020

Lendings-3 , Banking Fundamentals to Know for Students.

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Documents to be taken from Mortgager : 

a) All material documents of a title like a sale deed/gift deed/will/partition deed that conveys the title in his or her favor. 
b) Parent documents for the prescribed period to ascertain the flow of title. 
c) Encumbrance certificated) Tax receipt of the property 
e) Search report 
f) Authenticity of the documents has to be checked by a panel of advocates Valuation of property.

When an advance is allowed against the security of an immovable property, it is necessary to get approved by an approved valuer.
 
While valuating the property following may be taken into consideration: 

a) Location of land and the consequent location value  b) Age of the building 
c) The nature of its construction 
d) Taxes paid 
e) The extent of the land and the building area 
f) The cost incurred for building construction   

Leasehold properties: 
If the land is leasehold, it is necessary to ascertain whether the terms of the lease permit the borrower to assign or transfer by the way of mortgage, the leasehold rights in the land.  
Standing Crops and other agricultural produce: 

Banks advance loans routinely against the security of the standing crops, agricultural produces, agricultural inputs like fertilizers, pesticides etc. It remains in the form of a pledge. One of the most essential requirements of a pledge is the actual or constructive delivery of goods pledged to the pledgee.  
The term ‘constructive ‘delivery means that there is no need for physical transfer of goods from the custody of the pledger to the pledgee.  
When the possession of goods is not transferred, The nature of charge created is hypothecation.

Hypothecation differs from a mortgage in two respects. a) Firstly mortgage relates to the immovable property where is hypothecation relates to movables.
b) Secondly, In a mortgage, there is a transfer of an interest in the property to the creditor but in hypothecation, there is only an obligation to repay the money and no transfer of interest.  
In the case of pledge and hypothecation, the title in goods is not transferred to the bank.  

Precautions to be taken against the advance of goods.  
1. No advance should be made for speculation
2. The goods charged to the bank should have been fully paid
3. The age of stock should be reasonable
4. The ownership should be ensured by verifying the original invoices
5. As the price of goods or raw material pledged may vary from time to time the bank should stipulate an appropriate margin at all times. 
6. If the borrower has own goods apart from pledged goods then he \ she should segregate the goods while storing in the godown. 
7. The goods should be adequately insured.
   
Points to be taken into consideration: 

The policy must be in force and the premium paid up to date. The latest premium receipt must be kept on record by the bank. 
The policy should be an original, duly stamped and signed by the issuing authority.      The policy should be free from restrictive clauses.

Following documents usually not accepted by the bank as security

a) Children endowment policy
b) The policy is taken out specifically for purposes like estate duty
c) Children deferred policy
d) Policies with nominations under section 6 of married woman property cat  

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