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LOAN ON HYPOTHECATION ON GOODS (CC)
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1) As in hypothecation of goods, the possession of the goods rests with the owner(borrower), the Bank shall have its hypothecation over goods of business/trade/industry of the owner and shall have access to inspect them at all times during the working hours/days.
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2) A written declaration about borrower’s existing credit facilities or arrangements with other banks and an undertaking that the stocks or goods will not be hypothecated or pledged with any other banks without the consent of the Bank shall be invariably taken. The undertaking should also be incorporated in the stock statement.
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3) The stocks or goods to be hypothecated to the Bank must be verified by the concerned Officer in the first instance and by the concerned staff periodically. The Bank should also obtain periodical stock statement showing quantity, rate (price) and value of the goods and also the turnover of purchaser and sales. The valuation of goods should be made at cost price or market price wihichever is lower. The drawing power should be revised from time to time on the basis of stock statements and current market prices and prescribed margin should always be maintained. As the goods remain in the possession of the borrower, the Bank’s board should be displayed on the premises to serve as a notice to the public about the Bank’s charge on the stock goods.
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4) The hypothecated stocks/goods should insured for the full value against the risk of fire, burglary, riod and natural calamities like flood, toofan, earthquake etc., in the Joint name of the borrower and the Bank Insurance Policies should be usually retained with the Bank and periodical premium should be debited to the cash credit account.
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5) The salel proceeds of the hypothecated goods should, by and large, be routed through the account as indicated by the operations in the account in relation to borrower’s sales turnover.
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6) In case of advances to Joint Stock Companies, the charge on goods hypothecated to the Bank should be registered with the Registrar of Companies after verifying that there are no subsisting prior charges. In this regard, a reference should be made to Company’s own register of charges maintained in terms of Sec 143 of the companies Act 1956.
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7) The goods and commodities to be hypothecated to the Bank for cash credit loan should be decided by the Board of Directors keeping in view the directives issued by RBI from time to time under Selective Credit Control.
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8) The borrower shall also mortgage his immovable property like land, building or sites etc as collateral security in addition to the hypothecation of goods.
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9) Documents : The following documents should be obtained with application form.
i) Demand Promissory Note (2)
ii) Letter of continuing Security
iii) Hypothecation Deed
iv) Declaration of ownership of goods and prior nil encumbrance
v) Letter of Lien and Set Off
vi) Property extract of the collateral security mortgaged and its Emcumbrance Certificate
vii) Stock Statements.
viii) Assessment order, audited Balance Sheet and Profit and Loss Account for last three years.
ix) PAN card copy of TAN copy or Licence from Local body (CMC, Panchayati etc)
x) Operations of the Hypothecatio (CC) accounts, should be allowed within prescribed limit sanctioned by the Board. Under any circumstances, the borrower should not be allowed to operate the account beyond sanctioned limit. But, insurance premium may be debited, even if the arrangement exceeds.
xi) If the borrower fails to repay the loan or to get the account renewed on or before the due date, the Bank should endeavour to seize the goods under hypothecation to the Bank and recovery proceedings shall be initiated against the borrower and the sureties.
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