Method of charge creation

Method of creating charges on security

1. Lien
2. Assignment
3. Set-off
4. Pledge
5. Hypothecation
6. Mortgage

 Lien:
The lien is a mode of creation of charge specially on assets of financial instruments like fixed deposit, TDR, deposit balance etc.

Assignment:
It is a mode of creation of charge on the financial instrument like Bills Receivables covering security against debt and be liquidated against debt when the Bills becomes matured. Here the owner of the proceeds of Bills is known as Assignor, the Bank is Assignee and the proceeds received from whom is known as Debtor of Assignor.



Set-off:
On account balance by executing letter o Set-of in favor of the Bank to pay/adjust the debt due for payment from the credit balance against a/c of same name.

Pledge:
charge in favor of the lender on some identified movable assets or goods of the borrower where the possession of goods remains under full and effective control of the lender/bank to payment o debt through execution letter of pledge.

Hypothecation:
charge in favor of the lender on some identified movable assets or goods of the borrower where the possession and control over goods are hold by the borrower/client. In case of Hypothecation bank cannot exercise to return back and sell the goods without court permission.

Mortgage:
It is a method for creation of charges/right on Immovable Assets like Land, Building collateral against coverage of debt taken.