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Security release by document handing to client

vibha (banker) (45 Points)

26 May 2015

urgent help required- we have granted bank finance under consortium. leader is SBI. Now SBI is being replaces and banking system changed to multiple banking. documents were with SBI for consortium. query is- if SBI hands over documents to borrower, in place of other consortium lender (limits are o/s), whether handing over documents to client amount as release of security for other lenders.

Pls. guide.

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5 Replies

CA CMA CS Ram Pavan Kumar Melam (CA) (6980 Points)
Replied 04 June 2015

Vibha, When a new banker takes over the existing loan of a borrower, it ensures documents handed over by existing borrower to it.

If the documents comes under the borrowers hand, he is holding them as a trustee to the new banker and he is under an obligation to handover them to it.

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vibha (banker) (45 Points)
Replied 05 June 2015

Here sbi is not handing over documents to existing banker in the consortium. Say b bank. They r giving to new bank. So for b bank will it amount as security release

CA CMA CS Ram Pavan Kumar Melam (CA) (6980 Points)
Replied 06 June 2015

Pl repost your query clearly

vibha (banker) (45 Points)
Replied 06 June 2015

A nd B bank has given loan to G co in consortium. A is the leader nd holds security doc's on behalf of consortium. Now A share is taken over by C bank and now it will be multiple banking. So B bank is saying that we shall get docs from A bank as we were con consorti partners and not C bank. As going forward it is multiple banking. A Bank is saying that we will give docs to eiyher client or new C bank. as per B bank, if the docs are handed over to client then.it will be technically release of security for us. Thus pls suggest

VENKATA PRANEETH MANEPALLI (Student CA IPC / IPCC) (23 Points)
Replied 06 June 2015

First , handing over of documents to client i.e. "borrower" , amounts to release of security.

second, A bank is holding documents on behalf of the consortium which consists of A & B banks

Third , A bank has nothing to do with C bank, though C bank is taking the share of A bank

Fourth , Once it is said that it is multiple banking , then , B & C banks shall obtain separate documents as per their individual sanctioned limits.

Fifth , If the query is about release of collateral securities , then , A bank is under obligation to hand over the security documents to B bank , as, the same were held by A bank as a leader of consortium and on behalf of consortium only.

This is with due respect to MALLIKARJUNA SWAMI OF SRISAILAM.

MVSSKS RAMESH,