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.…
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 interest rate on advance levied by banks comprises the BPLR, Base rate, MCLR rate, or external benchmarks like Repo-linked lending of the respective bank, and the ‘Spread’ over the cost of lending is decided by the bank’s Board. The determination of ‘Spread’ varies on each category of advance depending upon the tenure of the…
The SARFAESI ACT is the acronym of Securitisation And Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002. The Act has been amended by the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act 2004. The SARFAESI Act provides for Enforcement of Security Interest for the realization of the dues without the intervention of Courts or Tribunals which is treated as one…
In the case of running accounts like current accounts or cash credit accounts, normally there is no specific appropriation of funds to exact debit. In such cases, it is the first item on the debit side that is discharged or reduced by the first item on the credit side. This principle was originally formulated in…
The banker’s right to combine different accounts of a person against the debt it holds against the same person is called the right to set off. The right of set-off is available to the bank only when the money owed to the bank is a certain sum, which should be due at the time of…
The guidelines on Trade Receivables Discounting System (TReDS) were issued in December 2014 with the objective of facilitating the financing of trade receivables of MSMEs. Small businesses can use the TReDS platform to raise capital by auctioning off their trade receivables. Before the buyer pays, a finance provider or a bank (basically the vendor) bids…
TReDS (Trade Receivables Discounting System) is an institutional setup for the flow of finance to micro, small, and medium enterprises (MSMEs) through multiple financiers at a competitive rate. The model outlined for TReDS in the paper, envisages its operation both in the primary market segment as well as a secondary market segment as authorised payment…
The Statement on Developmental and Regulatory Policies dated February 8, 2023 sets out various developmental and regulatory policy measures relating to (i) Financial Markets; (ii) Regulation; (iii) Payment and Settlement Systems and (iv) Currency Management. In its statement today, India’s central bank announced that it will issue draft guidelines for transparency in the penal charges…
(This post elucidates the entire process of creation of charge or modification of charge and satisfaction of charge and the requirement of information in the form of a resolution passed in the Board meeting) According to Section 77 of the Companies Act, every company that creates a charge shall register the same with the Registrar…