Primary Security and Collateral Security - All You Need to Know

PRIMARY SECURITY & COLLATERAL SECURITY - ALL YOU NEED TO KNOW

Essential for All Upcoming Bank Exams

Introduction: 

• Enhanced dependency of financial industry has two main effects in advanced technologies. 
• Financial institutions can adopt these technologies and get new and improved services, solve succession problems and initiate competitive interaction. 
• The increasing complexity of this system creates more potentially vulnerable space for the cyber criminals to exploit. It also costs customers to adequately research, develop and distribute these advanced technologies and services. 
• It is important to manage these complications and related risks to improve the security situation in the banking system. A security leader's main priority is to protect the attackers from entering the organization's IT ecosystem and reducing corrosion. With no violation, the likelihood of data loss, trust, and revenue losses, and it can also be better as overall reputation. 

What is Security? 

• One of the most important functions of the bank is to hire its customers through debt and progress and a bank's strength depends on its credit and quality of progress. Location today is quite different. 
• Banks in large offices across a large area do not allow loans and progress without a form or any other security. 
• Security is obtained as a line of defense to fall back on as a line. By accepting security, the bank claims on the borrower's property, if given plans are not planned. 

Security taken by the bank can be classified into two categories – 

1. Primary Security and 
2. Collateral Security. 

Primary Security: 

On simple terms, primary security is the asset that is made out of money given by the lender. For example, in the housing loan, the primary security is that the house has been purchased from the bank loan. A cash credit limited, primary security stocks and primary loan of books, for which CC limit has been given a term loan for the equipment, and the equipment is the primary security. 

One of the primary security which is deposited by the borrower and thus provides a major cover for the advancement. Primary security can be either Personal security or Incomplete/ Impersonal security or both. 

Personal Security – 

• When a personal advance is made, the borrower is personally liable for refund of advance money, for which he executes a promise note, accepts or approves the exchange bill, and places personal contracts in mortgage or loan contracts. 
• The banker has the right to take action against the individual borrowing without fulfilling the criteria or conditions as per the contract. 

Impersonal Security – 

• Personal maintenance is done when a charge is made through compulsion / pledge / mortgage on the stupid property of the borrower, such as products and commodities, fixed assets, book loans and bill raising etc. 
• In the case of default, the bank's ability to abolish the spontaneous security and to recover the arrears gives the court's intervention or direct management capability. Personal security can take certain precise security or security and pay arrears. 
• Personal safety can take a certain security or continuous security form. Its specific security only covers certain loans and it does not belong to any other loan lender to the bank. 

Collateral security: 

• Collateral Security is security that is not primary security. Negative money, secondary or extra, which means, besides securing primary security for secured credit, the security of the guarantor is taken from the lenders. Generally a property or other asset (such as land, building, shares etc.) is lent for the lender to the lender. In a broad sense the defense is used to use any type of security that takes place alongside or with the individual as well as with the right to act against a debtor concerning an advance. 
• Collateral security may be direct or indirect. 
• To protect your account, the borrower's protection from yourself is known as Direct Parallel/ Collateral security. Advancing against the compulsion of stock-in-trade, which is considered to be a weak security, the headline of the borrower's property is strengthened by the equitable mortgage. 
• Indirect fraud security means security provided by a third person to secure the customer's account. A guarantee is an indirect restraint because it is secured to another person's negativity by a person. 
• A proper form of normal practice should be obtained in a memorandum submitted to the security. This is most essential because the law, although such a memorandum is not necessary, bankers use it, protecting themselves by including the necessary provisions for such protection. 

The most significant categories of security lodged as cover are – 

1. Fixed Deposit Receipt 
2. Book debts 
3. Real estate stock exchange securities 
4. Life Insurance policies 
5. Goods and commodities 
6. Gold and gold ornaments 
7. Supply bills. 
8. Documents of title to goods 

This property is each different kind and needs to be dealt with differently. But it should be remembered clearly that there is no security vulnerability in every form and there is nothing like perfect security.