The article explains various types of charges created by banks to establish their rights over the specified security when the borrower defaults. The charge creation means establishing the lender’s right to recover from the specified assets of the borrower, in case the recovery is difficult in the normal course. The mode of bank charge on…
The Fixed charge is a charge on a defined property offered to the lender as security which should be clearly identifiable. During the existence of fixed charge, the borrower cannot change either the nature/identity of the property or otherwise dispose off the property. The securities commonly covered under fixed charge are a mortgage of immovable properties…
As per the current guidelines, Securitisation is allowed only in the case of standard assets while lenders have to largely rely on Asset Reconstruction Companies (ARCs) for bad assets. Based on market feedback, stakeholder consultations, and the recommendations of the Task Force on Development of Secondary Market for Corporate Loans, RBI decided to introduce a…
A bankruptcy remote entity is a special-purpose vehicle (“SPV”) that is formed to hold a defined group of assets and to protect them from being administered as property of a bankruptcy estate. The corporate documents of bankruptcy remote like memorandum association and article association may also attempt to create disablements to a bankruptcy filing. For…
Following the ordinance empowering RBI to lay down the process of initiating steps under the Insolvency and Bankruptcy Code (IBC), an Internal Advisory Committee (IAC) is set up by RBI to oversee the specific steps that are initiated by bankers for resolution of a bad debt. In its first meeting on June 12, 2017, the…
(This post narrates the background of introducing the ‘bankruptcy law’ and in what way the new law is likely flags the problem loans and protects the interest of lenders.) The ‘Insolvency and Bankruptcy Code, 2016’ bill will be shortly enacted as an ‘ACT’ which will be dealing with resolutions of insolvency and bankruptcy. The fundamental…
In the context of bank loans in India, security refers to the assets that a borrower pledges to a lender as a guarantee of loan repayment, mitigating the lender’s risk in case of default. Essentially, it’s a form of collateral that the lender can seize or sell if the borrower fails to meet their loan…
The lender’s right to the term “Hypothecation of assets” was not defined anywhere in the statute till the SARFAESI ordinance 2002. Some courts have even compared ‘hypothecation to a mortgage of movables’. Hypothecation occurs when an asset is offered by the borrower to the lender as prime or collateral to secure a loan/credit limit without…
Originally posted on July 22, 2014, and updated on 15, March 2023 Generally speaking, a lien (positive lien) is merely a right of a person to retain a property that is in his possession but belongs to another person till such time the debt or other obligation (for which such lien is conferred) is discharged.…
The main concern of a bank is that security available to it should be good enough to fall back upon, in the event of adverse circumstances. The role of loan documentation in the bank is to establish a legal relationship between the lender and the borrower when the dispute goes to a court of law.…