Legal Issues relevant to Banking

  • Guarantee: A contract of guarantee is a contract to perform the promise, or discharge the liability of a third person in case of his default’ (Sec. 126 of Indian Contract Act, 1872).
  • Indemnity: A contract by which one party promises to save the other from loss caused to him by the conduct of the promissory himself or by the conduct of any other person, is called a contract of indemnity (Section 124 of Indian Contract Act, 1872).
  • Continuing guarantee: A guarantee which extends to a series of promises or transactions is called a ‘continuing – guarantee’ (Section 129 of Indian Contract Act, 1872). 201
  • Assignment: Is a mode of charge by which one person transfers to another, or causes to vest in that other, the whole of the right, interest. or property which he has in any such assets/documents.
  • Surety/Guarantor: The person who gives the guarantee is called the ‘surety’: the person in respect of whose default the guarantee is given is called the ‘principal debtor’, and the person to whom the guarantee is given is called the ‘creditor’.
  • Co-surety: When more than one person guarantee a debt, all of them are called co-sureties and are liable to pay the debt of the principal debtor.
  • SecurItization: is the financial practice of pooling various types of contractual debts/ Loans and selling said consolidated debt as bonds, pass-through securities. to various investors. and selling said consolidated debt as bonds, pass-through securities. to various investors. Securitisation deals with the conversion of illiquid assets which are not marketable into marketable ones. They are then sold to ARCs.