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this video speaks about the various Securities
acceptable to the banks while giving loans
and advances.
Banks in India two types of Loans
1) Secured loans and unsecured loans
Loans and advances granted against the various
securities are called Secured loans
and Loans sanctioned only against the credibility
of the individual person or without any securities
is known as unsecured loans
the various securities acceptable from various
types of customers can be
1) Fixed or Re-investment deposits of the
same bank
The Fixed or Re-investment deposits receipt
or passbooks are good securities because the
money is invested by the depositor himself
75 to 90% of the accrued value- accumulated
value of the deposit will be given as a Loan
Banks normally discredit the deposit reciepts
of other bank because that other bank has
got a primary hold over this deposits
2) Shares and Debentures
The Shares and Debentures of various companies
in India are approved securities
of the bank lending,
normally banks will not lend against unlisted
companies
listed companies shares and debentures which
are normally traded in the market are taken
as securities
For shares held in Demat account are taken
as security by virtue of certain documentation
Insurance policies- normally life insurance
policy are taken as security for purpose of
granting loans and individual borrower can
give life insurance policies as a security
normally some percentage of the surrender
value will be given as loan
or overdraft
next number 4 is about Government Securities
Government securities are good securities
for the bank lending
examples of government securities are National
Saving Certificate, Kisan Vikas Patra, Government
Bonds, Government promissory notes, Treasury
bills or Dated securities
number 5- goods and document of title to goods
the companies which are manufacturing goods
and the retailer and wholesaler, stockist,
distributor who have got goods. These goods
can be Pledged or hypothecated to the bank
and given as security
Normally the goods move from the manufacturer
to the wholesaler to retailer or from stockists
to distributor and retailer or by way of online
sales and purchases
Online purchase and sales- the possession
of goods go on changing. So the average value
of goods stored in the Godown will be taken
as the security and a percentage of that will
be given as loan
normally 50 to 60% of the value of the goods
is considered as a loan or an overdraft and
cash credit to the borrower
Documents of Title to goods- when goods are
moving from one place to another in terms
of sale and agreement to sell,
The carrier or transporter will issue a receipt
and these receipts particularly from approved
lorry transport operators and the Railways
will be accepted as a good document of title
and they can be accepted as a security
6) gold- gold is a most tangible security
gold loans are granted to agriculturist as
well as urban consumers
gold loans can be sanctioned either by way
of a loan repayable in installments are in
one shot
Or by way of overdraft
however the gold has to be valued by a gold
Jewel appraiser, which are in the panel of
the bank
number 7 agricultural land Or development
agricultural fields developmental loans the
agricultural land can be accepted as a mortgage
agricultural land normally are not accepted
for commercial loans
then commercial land & buildings/ Residential
lands and Building have both in rural areas
and urban areas
home loan is a classic example of the mortgage
of land and buildings the plot, the villas,
flats,houses and commercial buildings will
be accepted as a security
So it depends on the estimated market value
in case of an existing building
In case of a proposed home loan purchase the
purchase consideration agreed between the
seller and the buyer will be taken as a base
and a percentage of the value will be given
as a loan
secondly in case of home loans it is again
the repaying capacity and an income earning
capacity of the borrower or borrowers which
is taken into consideration
next No. 9 Machinery and other fixed assets-
the Machinery and other fixed assets like
furniture equipment, electrical fittings and
various other fixed assets can be taken as
a security for granting loans and advances
the borrowers can give this as a security,
their depreciated value is taken as the value
of security and a percentage of that value
is given as a loan or other credit facilities
number 10 is Consumer Goods-
when banks considered consumer loans the consumer
goods in the possession of the borrower will
be taken as a security but the possession
remains with the borrower
it's only an agreement of trust that goes
in and this is a continuing security for the
bank
Then Vehicle loans normally two wheeler, three
wheeler four wheeler accepted security for
purpose of the individual buyers
Normally banks considered loans on new vehicles,
in case of second hand vehicles it should
be certified by an Automobile Engineer or
a dealer which is acceptable to the bank
the value in case of new, brand new vehicles-
the Purchase consideration or the sale value
or in case of second hand vehicles
the value determined by the automobile Expert
will be taken as the base for considering
the loan
A certain percentage of the loan, Normally
about 85 to 90% of the value is given.
This percentage varies from bank to bank
Next Shipping vessels- in case of ships motor,
boat steamer and all that
Last but not the least electronic equipments-
hardware and software are also accepted as
securities.
Like computers, PC, Laptops, mobile handset
(Costly mobile handset) hardware and software
In case of software there are certain precautions
to be taken because there is no tangible securities
there
but it can be accepted as a security, subject
to certain rules and regulations regarding
the authorities who is for encrypting and
decrypting the messages and the
market value of the Purchase and sale of the
software
These are some of the major items, there may
still there be other items of securities which
can be discussed with the bank
Security oriented approach is followed when
the borrowers offers security and the banks
considered securred loans
In case of certain government sponsored schemes
and very small loans the assets created out
of the bank loan is a taken as a security
not the existing securities available with
the borrower
the proposed security or assets to be purchased
by the borrower is taken as a security for
the banks loans and advances
The securities apart- banks may insist upon
the personal guarantee or surety or Co-obligation
of another person
to consider loans and advances to the borrowers
depending on the nature of borrowers
this is a Very important lesson for the students
of Banking at UG and PG levels
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