Negative lien and set off
There is no legal definition of 'negative lien'. Lien is the right to retain goods of a borrower or pledgor for the debt. Negative Lien is used in banking parlance for a borrower to undertake not to create any charge on his property without the consent
of the lender. The borrower may sometime be having non-encumbered assets which are not charged to the bank as security. The borrower is thus free to deal with these assets
and may even sell them if he so desires. To restrict this right of the borrower, bank may sometimes request him to give an undertaking to the effect that he will neither create any encumbrance on these assets nor sell them without the previous permission of the bank so long as the advance continues......
Negative Lien: When goods and securities are in possession of borrowers creditor
obtains an undertaking from the borrower that he will not create any charge on those
securities without the prior permission of the creditor this kind of lien is called as
negative lien.
The borrower may sometime be having non-encumbered assets which are not charged
to the bank as security. The borrower is thus free to deal with these assets and may
even sell them if he so desires. To restrict this right of the borrower, bank may
sometimes request him to give an undertaking to the effect that he will neither create
any encumbrance on these assets nor sell them without the previous permission of the
bank so long as the advance continues.
Set Off: The set-off refers to ―combining of two or more account for final settlement of
accounts‖
In other words set off is a process where the bank recovers its due loan, to the debit of
deposit account of the burrower
The essential condition is that one of such accounts must show a debit balance and the
other, a credit balance
Different Branches are one unit
For exercising the right to set off all branches of a bank are treated as a single unit,
which means a loan from branch-A can be adjusted by the funds in branch-B
There is no legal definition of 'negative lien'. Lien is the right to retain goods of a borrower or pledgor for the debt. Negative Lien is used in banking parlance for a borrower to undertake not to create any charge on his property without the consent
of the lender. The borrower may sometime be having non-encumbered assets which are not charged to the bank as security. The borrower is thus free to deal with these assets
and may even sell them if he so desires. To restrict this right of the borrower, bank may sometimes request him to give an undertaking to the effect that he will neither create any encumbrance on these assets nor sell them without the previous permission of the bank so long as the advance continues......
Negative Lien: When goods and securities are in possession of borrowers creditor
obtains an undertaking from the borrower that he will not create any charge on those
securities without the prior permission of the creditor this kind of lien is called as
negative lien.
The borrower may sometime be having non-encumbered assets which are not charged
to the bank as security. The borrower is thus free to deal with these assets and may
even sell them if he so desires. To restrict this right of the borrower, bank may
sometimes request him to give an undertaking to the effect that he will neither create
any encumbrance on these assets nor sell them without the previous permission of the
bank so long as the advance continues.
Set Off: The set-off refers to ―combining of two or more account for final settlement of
accounts‖
In other words set off is a process where the bank recovers its due loan, to the debit of
deposit account of the burrower
The essential condition is that one of such accounts must show a debit balance and the
other, a credit balance
Different Branches are one unit
For exercising the right to set off all branches of a bank are treated as a single unit,
which means a loan from branch-A can be adjusted by the funds in branch-B
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