Legal & Regulatory Aspects of Banking - Various Types of Securities Unit - 15 : Various Types of Securities An advance made by a banker may be secured by a collateral security . The effectiveness of a security would largely depend upon the nature of security viz . Economic Aspect ( marketability ,valuation) and other economic factors that has a bearing on the value of the security. The other is the legal aspect( validity and enforceability ) UNSECURED LOANS AND SECURED LOANS Unsecured Loans: It is one for which the banker has to rely upon the personal integrity of the borrower. The main basis of this transaction is personal credit worthiness of the customer.
Secured Loans: Secured Loans are antithesis of unsecured loans. These loans are given by banker not merely based on his confidence on the borrower's future financial strength but also based on his present net worth that he is able to give a banker to rely upon and recover the money lent in the event of his failure to repay the loan in the ordinary course.
VARIOUS KINDS OF SECURITIES : 1. Land/ Real Estate 2. Stock and Shares 3. Debentures 4. Goods 5. Life Policies 6. Gold Loan 7. Book Debts 8. Fixed Deposit 9. Supply Bills 10. Vehicle financing