Security and Charge creation

Bank takes different types of security from client while giving investment eg cash, goods, land and buildings, machines, share certificate etc. Banks get the clients sign different documents to establish its right on security given to banks. These are known as Charge documents. Without signing charge documents, security kept to bank will be simply preservation of others property. In case, clients fail and want its security bank, bank will be legally bound to give.

Methods of Charge creation:

          1.     Pledge

2.     Hyphenation

3.     Mortgage

4.     Lien

5.     Right of set off

6.     Assignment

Charge creation documents are 

          1.     Agreements:  Bai murahaba/bai salam/bai muajjal/ HPSM

2.     demand promissory note,

3.     DP note delivery letter,

4.     Balance Confirmation

5.     Letter of Undertaking

6.     Personal Guarnatee

7.     trust receipt,

8.     Agreement for pledge of goods

9.     Delivery Order

10.     Letter of Hypothecation

11.    Purchase schedule

12.      Letter of continuity

13.     Letter of Arrangement

14.     Letter of Authority

15.     Letter of Disclaimer

16.     Cheque deposit letter

17.     Verification certificate of Mortgage Documents

18.      Certificate of Documentation (Checklist)

           19.    Letter of Installment 

            20.      Second mortgage

  21.     Creation of further charge

Types of Security: mainly 2, Primary and Collateral

            1.     Real Security: honesty, capability, business experience of client.

2.     Cash security

3.     Goods security: 

4.     Primary security: personal guarantee of client, goods in which bank invests or its documents, cash etc

5.     Collateral security: land, building, third party guarantee

Considerable matters while accepting security:

                1.     Acceptability

2.     Ownership

3.     Marketability

4.     Price stability

5.     Non encumbrance

6.     Adequacy

7.     Quality

8.     Price determination

9.     Ability

10. Honesty

11. Easy storability

          

	Pledge	Hyphenation	Mortgage
Types of Property	Movable property		Immovable Property
Possession	At bank	To client	To client
Ownership	Client	Client	Without registered mortgage, ownership remains to client
In case of registered mortgage and pledge, if bank is given is given power of attorney, bank can sell the property without the permission from court.