Different Modes of Charging Securities | Documentation | PAPER II – PRINCIPLES & PRACTICES OF BANKING | MODULE B: FUNCTIONS OF BANKS
Banking Theory: Securities, Contracts, and Documentation Banking Theory: Securities, Contracts, and Documentation 1. Different Modes of Charging Securities Securities are assets pledged by a borrower to secure a loan. The main modes of charging securities include: Pledge: Physical transfer of goods to lender (e.g., gold loan). Hypothecation: Possession remains with borrower; lender has a right over it (e.g., car loan). Mortgage: Transfer of interest in immovable property (e.g., home loan). Assignment: Transfer of rights (e.g., insurance policy assigned to a bank). Example: If Mr. A hypothecates his car worth ₹5,00,000 to take a loan of ₹3,00,000, the bank has a charge over the car without possession. 2. Meaning and Essentials of a Contract A contract is an agreement enforceable by law. Essentials include: Offer and Acceptance Intention to Create Legal Obligations Lawful Consideration Capa...