Lesson No. 7 – Types of Securities – I

Good noon my " Y" gen f b friends
Let us discuss today Types of Securities which we accept for Loans and charge created on them.
Sunday 7/2/2016

***** LESSON no 7*****
We will divide securities under 4 heads Financial Securities
Goods
Cattle/Animals
Personal
1 Financial Securities - The securities where the value is easily determinable /written on it and generally in a Paper form or digital form eg FD of Banks/Companies, Shares/Debentures/Mutual Funds, Central/State Govt bonds ,Insurance policies (with Surrender value) and assignable, NSC,IVP/KVP ,Certificate of Deposits etc.
They possess high liquidity( in some cases after a specific lock in period).
WE SANCTION OVERDRAFT FACILITIES against them after marking Lien/Transferring or Assignments in our favour by issuing authorities or with DP.

2 GOODS- They are sub divided as ( a) Current Assets - CA (b) Fixed Assets -FA
(a) CA - They are meant for conversion into cash or they are Cash,En cashable securities/investments ; Inventory ie Raw Material, Semi Finished goods,SIP,WIP, Finished goods and Consumables (eg Oil,grease,tools,gigs,etc). (Standing crops, flowers,vegetables,fruits also form part of this) Book Debts /Receivables and Bills are also included in this group.
They have fare liquidity and are convertible into cash within business cycle.
WE SANCTION CASH CREDIT FACILITIES against Pledge or Hypothecation against these Securities.
Against Book Debts/Receivables; Railway Receipts/Lorry Receipts , MTR, Bills of Lading,Air way bills,Ware house Receipts of -CWC ,Rural Godowns, Approved Godowns ,Supply Bills etc ( Some times we even sanction Overdraft or Post shipment finance or Short term Loans).

(b)FA :- They assist/facilitate in carrying out the economic activity (ie business, industry, professional,agril etc) ; their life is long, they are not meant for selling or conversion into cash; they generate income in a long period
AS SUCH WE SANCTION TERM LOANS against these securities and loan is repayable in along period attuned with its abilities to generate income.
FA are further classified in Two classes. (i)Immovable:- Assets attached with land and appurtenant to it and not meant for Cutting ( T P act) - Land,Building, Fixed Plant and Machinery, Furniture and fixture affixed permanently,Trees,Well,Godowns etc We create Mortgage charge on them.
(ii) Movable Assets:- Not permanently attached with land and / or meant for moving ie Movable Plant and Machinery ,Furniture Fixture,Computers,peripherals, Vehicles, Tractor,Earth moving equipment's etc.
We create Hypothecation charge on them to secure loan.

3: Cattle/Animals - We create Hypothecation charge on them.

4 Personal Security/Guarantee:- It means action of attachment and /or sale against the properties owned by the person and/or Action against the person ie putting him behind the bars through the competent courts.
We execute a letter of guarantees and/ or indemnity against the signatories. Individual guarantees, Letter of Guarantees by all partners,Corporate guarantees,guarantees by sister concerns jont guarantees by an SHG are common examples. (Remember that Guarantees by Companies should be backed by a properly drafted resolution)

I take your leave,Good noon!

Waman Gokhale
(Writer of Banking Beyond Books
Mob n 7350901500 ; waman.gokhale@gmail. com)