BUSINESS DECISION

MAKING

GROUP 4

Sourya Mishra (2)

Ipsita Parhi (11)
Vidushi Sharma (28)
Janki Shah (30)
Neelima Krishnan(33)
Bhakti Modle (48)

Sources Of Finance

Repayment schedule
Also known as loan amortization.
Two components-interest &
repayment of principal.
Interest Legally enforceable contractual
obligation.
Payment of commitment charge on
unutilized amount by the borrower.
Interest subject to a minimum PLR.

 Varies with credit risk.

In case of default, liquidated
damages or penal interest at
specified rate for the period
of default on the default
amount has to be paid.
Principal repayable over 6-10
years after initial grace of 1-2
years.

 In case of:
FI- repayment is in equal semiannual installments.
Banks- repayment is in equal
quarterly installments.

In this type of loan

amortization the interest
burden declines & principal
repayment remains
constant.

CASE STUDY
M/s Navkar Corporation Ltd.
(NCL),is a public limited company.
The Company is in the niche
business of providing logistics and
transportation solutions.
NCL implemented a project
under the heads

Land Development for Rail Siding

Construction of Rail Siding
Installation of Railway Tracks
Construction of Pre Engineering
Building Shed

 The total project cost is 241

crores.
Out of this 149.81crores was
funded by term loan from
State Bank of India.
TL1-71 crores
TL2-30 crores
TL3-23 crores
TL4-26 crores

HYPOTHECATION
This is offering something as
collateral for a debt.
In hypothecation, the debtor
usually does not have to turn
over physical custody of the
collateral although the lender is
"hypothetically" in control of the
collateral.
A common example occurs when
a consumer enters into a
mortgage agreement, in which
the consumer's movable property
becomes collateral until the loan

Hypothecation in investment
markets
When an investor asks a broker to purchase securities on
margin, hypothecation can occur in two senses.
The purchased assets can be hypothecated, so that if the
investor fails to keep up credit repayments the broker can sell
some of the securities. The broker can also sell the securities if
they drop in value and the investor fails to respond to a margin
call.
The second sense is that the original deposit the investor puts
down for the margin account can itself be in the form of
securities rather than a cash deposit, and again the securities
belong to the investor but can be sold by the creditor in the
case of a default.
In both cases, unlike with consumer or business finance, the
borrower does not typically have possession of the securities
as they will be in accounts controlled by the broker, however
the borrower does still retain legal ownership.

MORTGAGE
Adebt instrument that issecured
by the collateral of specified real
estate property andthatthe
borrower is obliged to pay back
with apredetermined set of
payments.
Mortgages are used by individuals
and businesses to make large
purchases of real estate without
paying the entire value of the
purchase up front.

Characteristics Of
Mortgage
Interest:
Interest may be fixed for the life of the
loan or variable, and change at certain
pre-defined periods; the interest rate
can also, of course, be higher or lower.
Term:
Mortgage loans generally have a
maximum term, that is, the number of
years after which an amortizing loan
will be repaid. Some mortgage loans
may have no amortization, or require
full repayment of any remaining
balance at a certain date, or even

 Payment amount and frequency:

The amount paid per period and
the frequency of payments; in some
cases, the amount paid per period
may change or the borrower may
have the option to increase or
decrease the amount paid.
Prepayment:
Some types of mortgages may limit
or restrict prepayment of all or a
portion of the loan, or require
payment of a penalty to the lender
for prepayment.

Types Of Mortgage
The two basic types of amortized loans are
the fixed rate mortgage (FRM) and
adjustable-rate mortgage (ARM) (also known
as a floating rate or variable rate mortgage).
In a fixed rate mortgage, the interest rate,
and hence periodic payment, remains fixed
for the life (or term) of the loan. Therefore
the payment is fixed, although additional
costs (such as property taxes and
insurance) can and do change. For a fixed
rate mortgage, payments for principal and
interest should not change over the life of
the loan,

 In an adjustable rate mortgage, the

interest rate is generally fixed for a
period of time, after which it will
periodically (for example, annually
or monthly) adjust up or down to
some market index. Adjustable
rates transfer part of the interest
rate risk from the lender to the
borrower, and thus are widely used
where fixed rate funding is difficult
to obtain or prohibitively expensive.

PLEDGE
Transferring property as collateral for a
debt. Usually the person pledging does
not have control over the asset.
The goods which are offered as security
are transferred to the physical
possession of the lender.
An essential prerequisite for pledge is
that the goods are in the custody of the
bank.
The borrower who offers the security is
called a pawner (pledgor), while the bank
is called the pawnee (pledgee) .

 The lodging of the goods by the

pledgor to the pledgee is a kind
of bailment. Therefore, pledge
creates a liabilitynfor the bank.
Reasonable care must be taken.
Incase of non payment of loan,
the bank has the right to sell
the goods.

LIEN
An official claim of debt against
something.
In law, a lien is a form of security
interest granted over an item of
property to secure the payment of a
debt or performance of some other
obligation.
If you don't pay your property taxes, a
lien may be place against the
property.
The property can not be bought or
sold until the lien is paid and satisfied.

 Lien is of two types:

Particular lien it is right to retain
goods untill a claim pertaining to
the goods is fully paid.
General lien it can be applied till
all the dues of the claimant are
paid.

Banks usually prefer general

lien.

CHARGE
Where immovable property of one person is, by
the act of parties or by the operation of law,
made security for the payment to another and
the transaction does not amount to mortgage,
the latter person is said to have a charge on the
property and all the provisions of simple
mortgage will apply to such a charge.
The provisions are as follows:
A charge is not the tranfer of interest in the property
though it is security for payment. But mortgage is a
tranfer of intereszt in the property.
A charge maybe created by the act of parties or by
the operation of law. But a mortgage can be created
only by the act of parties.

a charge need not be made

in writing but a mortgage deed
must be attested.
A charge can not be enforced
against the transferee for
consideration without notice.
In a mortgage the transferee
of the mortgaged property can
acquire the remaining interest
in the property, if any is left.

HYPOTHECATI MORTGA
ON
GE
security for a debt
without
transferring
possession or title.

PLEDGE

transfers
title to the
lender or
permits a
voluntary
lien on the
property.
Legal
documents
registered
and
notarized

for current assets,

under this u can
sale the stock etc.
also but not under
mortgage

LIEN

for fixed
assets

Legal
documents
registered
and
notarized
when actual
possession
of asset is
hand-over
to lender

CHARGE

enforced
against a
bonafide
purchaser
for value
whether
with or
without
notice
security is
an
immovable
property
a
conveyance
of property,
subject to a
right of
redemption

Cannot be
enforced
against a
bonafide
purchaser
for value
whether
with or
without
notice
Security is
movable
property
only gives a
right to
payment out
of a
particular
immovable
property
without

THANK YOU