Loans Against Securities 📜

Banks lend money against Liquid Assets like Shares, Debentures, Bonds, and Mutual Fund Units.

1. Loans Against Shares 📈

Nature: Volatile (Price changes daily). Margin: High margin (usually 50%).

• If you have shares worth ₹1 Lakh, bank gives loan of ₹50,000.

Precautions:

1. Fully Paid Shares: Bank accepts only fully paid shares (Partly paid shares have liability).
2. Listed Companies: Shares must be listed on Stock Exchange (BSE/NSE).
3. Demat Form: Physical shares rarely accepted now. Pledge created in Demat account.
4. Diversification: Don't accept shares of only one company (Risk concentration).
5. Bank's Own Shares: Section 20 of Banking Regulation Act PROHIBITS bank from lending against its own shares.

2. Loans Against Debentures/Bonds 📄

Nature: Safer than shares (Fixed interest). Margin: Lower (15-25%).

Precautions:

1. Check credit rating of company.
2. Verify if debentures are transferable.

3. Loans Against Government Securities (G-Secs) 🇮🇳

Nature: Safest (Sovereign Guarantee). Margin: Very low (10%). Examples: NSC (National Savings Certificate), KVP (Kisan Vikas Patra), RBI Bonds.

Process:

• Pledge/Lien marked in Post Office/Depository.

Quiz Time! 🎯

💡 Final Wisdom: "Shares are like weather - unpredictable. G-Secs are like the sun - reliable. Banks lend accordingly!" 🌦️☀️

Next up: Loans Against Goods - Pledge and Hypothecation! 📦