Loan Structuring

 To develop such harmonized terms of

lending contract which will meet the
interests and needs of the lender and
the borrower.
 Loan structuring plan focuses on the
followings:
 Amount of loan /finance.
 Period of finance.
 Rate of mark-up (Loan pricing).
 Repayments (installments).
Loan support:
 Collaterals.

 Guarantees.

 Completion of
Documentation formalities
before disbursement of
loan
 Registration of charge.
Type of Finances/Credits:
 Fund Based.
 Non-Fund Based.
Trade Finances include:
 Export finance.
 Finance against foreign
bills.
 Foreign bill purchased.

 Packing credits.

 SBP’s export finance

scheme
Import Finances.

 Importletter of credit.
 Payment against Documents.
PAD & also
 Forced PAD)

 Finance against Trust Receipt

(FTR)
 Finance against Imported
Merchandise (FIM).
Sectoral finances
Include:
 Industrial Finance.

 Agricultural Finance.

 Finance for Construction/Housing.

 Consumer Finance
 Syndicated
finance/Consortium finance
 Number of banks participate in
this type of financing.
 Lead Bank – Lead Manager.
 Participating Banks.
 Borrowers/Customers comprise
of Government/Public sector
organizations or corporate
entities
 Fees: Comuitment fee,
Management fee etc.

 Loan structuring, pricing,

Packaging, Documentation,
Disbursement, Monitoring &
follow-up process as usual but
with required technical skills,
professional expertise.
Collaterals:

 Collaterals serve as safety

valve and provide the creditor
a recourse to collateral
(security) in case of default by
borrower (customer).

 Collaterals are not treated

/relied upon as primary source
of repayment of credit (loan).
Attributes of a good
collateral:
Readily Encashable
/Realizable.
 Readily
encashable/realizable in
case the borrower
defaults without legal
complications either by
bank itself or through
speedy legal process.
1) Adequate in Value:
 Value of security must be
adequate to enable the bank to
secure the outstanding amount of
principal and mark-up (interest).
Proper margins to be retained
while accepting a security
1) Clear Title:

 Title of security offered by the

borrower (mortgagor etc. ) should
be clear and unambiguous.
 No liability to third party
 4) Safety:
The asset offered as security should
be safe and durable.
Perishable items, explosives etc. are
not treated safe as securities.
Forms of Securities:
 Mortgage.
 Pledge.
 Hypothecation.
 Lien.
 Guarantee.
 Listed Stocks (shares).
 Government securities.
Mortgage
Mortgage Defined:
 Transfer of Property Act, 1881
defines mortgage as:

“The transfer of an interest in specific

immoveable Property for the purpose
of securing the payment of money
advanced or to be advanced by way
of loan, an existing or future debt or
performance of an engagement which
may give rise to a pecuniary liability”.
Rights of Mortgagee
(Bank):
 To sell the mortgaged property
in case of default by mortgagor.

 Right to fore-closure.

 Right to file suit.

 Types of Mortgage:
 Registered or Legal
Mortgage.
 This is created through
a formal document
called mortgage deed.
 Mortgage deed is
registered with the
Registrar of titles.
 It is comparatively
 Types of Mortgage:
a) Equitable Mortgage:

This is created by deposit of title

deed by the mortgagor.
 Memorandum regarding deposit of
title deed is also signed by
respective parties.
 Clear title of the deed must be
ascertained by the
bank/mortgagee
Pledge:
 According to section 172 of the
Contract Act:

“Pledge is the bailment of goods

as security for payment of a debt
or performance of a promise”.
Bailment-- Defined:
According to Section 148 of a
Contract Act 1872:
“ A bailment is the delivery of
goods by one person to another
for some purpose upon a
contract that they shall, when
the purpose is accomplished be
returned or otherwise disposed
of according to the directions of
the person delivering them”.
Bailment
 The pledgee (Bank) has actual
control of pledged stocks/Goods.
 Pledgee can sell pledged stocks
by giving reasonable notice to
the borrower.
 Before disposal, pledgee should
publish the notice through news
papers etc.
Hypothecation:
 “Hypothecation is a legal
transaction, whereby goods may
be made available as security for
a debt without transferring
possession
to the lender”.
Rights of Lender (Bank).
 To inspect Godowns.
 To demand stock reports from
the borrower.
Lien:
“Lien is a charge given by the customer
(borrower) to a
bank over some securities”.
 Letter of lien must be obtained from
the borrower (customer). It can be
over stocks (shares), fixed deposits,
bank accounts etc.
 In case the security offered is issued
by the third party the notice may be
issued to the respective party
regarding the same.
 lien to be noted on the said
property/security.
 According to companies ordinance
Guarantee:
“Guarantee is a contract to
perform the promise or
discharge the liability of a third
person is case of his default”.
 Rights of Creditor:
To recover the amount from the
guarantor in case the principal
debtor defaults.
To sue the guarantor.
A banker can sue principal
debtor and the guarantor at the
 INDEMNITY
 A contract of indemnity is a contract by
which one party promises to save the
other from loss caused to him by the
conduct of the promisor him self or by
conduct of any other person.
ILLUSTRATION:
Issuing a duplicate demand draft on
production of indemnity bond.
 INDEMNITY
 Parties in a contract of Indemnity
 Indemnity holder
 Indemnifier
 Rights of indemnity holder: Sec 125
 right to recover the damages in lieu of suit
filed against him
 To recover any expanses with regard to
any suit filed or contested by him.
 In case of compromise , the indemnified
can recover the expanses which he has
incurred in lieu of this compromise.
 INDEMNITY
 Rights of indemnifier:
 Indemnifier is protected under general
principal of law which states that where one
person agrees to indemnify the other, he will
on performing under the indemnity shall be
entitled to all the ways and means by which
the person indemnified might have protected
himself for the loss.