Securities used by bank for home loan

POSTED BY Sharan ON April 29, 2012 9:53 pm COMMENTS (5)

Hi there,
Need a clarification on the following;

We have applied for a loan of 60L from ICICI Bank. Now the bank is asking us to write checks for the entire loan amount, to be used as security against default, along with the property papers. The question is : Is this a regular requirement and is it legal/ acceptable to write check for the fund that we don’t have?


5 replies on this article “Securities used by bank for home loan”

  1. ICICI Bank Care says:


    We are to help you. Please send us your contact details ta and we will get back to you soon. Kindly refer ‘2948686’ in the subject line.

    ICICI Bank Customer Service Team

  2. Sharan says:

    Dear wealthucreate & BanyanFA,

    Thanks for your inputs, somehow I was not comfortable writing those checks along with submitting the property papers, but can’t help if that’s the procedure banks have decided to follow.

    But, hey, your timely feedback took care of lots of worries, because, now I know its an expected request from the bank.

    1. Dear Sharan, it’s a normal practice from almost all bankers. This I can say from my personal experience for myself or for my friends. As rightly pointed out by dear BanyanFA, this full amount cheque may be used if your loan account is already under default mode.



  3. BanyanFA says:

    Hi Sharan,
    Every bank has their own procedures to handle the security of payment. However, in most cases it is not for the entire loan amount, but for the 13-24 EMI cheques. Still, even if they ask for a cheque for the entire loan amount, there is nothing illegal around it.

    The bank is trying to have additional security under the negotiable instruments act whereby if the cheque is bounced, they can file a legal suit to recover the amount of the cheque, with penalty and interest. However, the bank shall not put this cheque in clearing before taking your permission and if you are not defaulting upon the loan. What would be considered as a default would be clearly mentioned in the loan agreement.

    Make sure that you have noted the details of cheques which you are handing over to the bank. After several years when you would be clearing your loan, you may forget the exact number of cheques lying idle with the bank and if these cheques go missing, it would add to your risk of someone trying to encash these cheques.


  4. I dont see anything wrong in this. Most of banks have similar procedure. Take the photocopies of cheques/papers before you hand over the papers.
    Make sure you go for True copy/attested before submitting orignals.

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