Common types of Bank Charge/Securities

  • Hypothecation: Hypothecation is another method of creating a charge over the movable assets. Under hypothecation neither ownership nor possession of goods is transferred to the creditor but an equitable charge is created in favour of the latter. The goods remain in the possession of the borrower, who binds himself, under an agreement, to give the possession of the goods to the banker, whenever the latter requires him to do so.
  • Mortgage: is defined as “the transfer of an interest in specific immovable property for the purpose of securing the payment of money, advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability”.
  • Lien: a right to keep possession of Property /Assets belonging to another person until a debt owed by that person is discharged.
  • Bailment: “delivery of goods from one person to another for some purpose upon the contract that the goods be returned back when the purpose is accomplished or otherwise disposed of according to the instructions of the bailor”.
  • Pledge: is defined as “bailment of goods as security or payment of a debt or performance of a promise”.