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JAIIB Paper 2: Principles & Practices of BankingModule A: General Banking OperationsUnit 04: Types of Charges Over Securities

Q1. Which type of security charge is created when moveable goods remain in physical possession of the borrower, but equitable constructive possession and right to seize upon default are granted to the bank?

Mortgage (Section 58 of Transfer of Property Act)

Lien (Section 170 of Indian Contract Act)

Pledge (Section 172 of Indian Contract Act)

Hypothecation (Section 2 of SARFAESI Act)

Incorrect Answer

Formula: Hypothecation = Charge on Moveables with Borrower Possession

Hypothecation creates a charge on moveable property without delivery of physical possession (the borrower retains possession for business operations). In contrast, Pledge requires physical or constructive delivery of goods to the banker.

Learn & Practice in CredWisdom: Securities & Charges Chapter Deed of Hypothecation Template

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