Negotiable Instruments: Exhaustive Coverage by Adv Roma Bhagat. Register Now!
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Ashok Rawat (PGDBM)     21 July 2016

Lien fd

Dear Sir,

My query is as under :

One of my customer wants to give LIEN FDR in favour of our company. Now I have few questions 

1. In case we want to encash the same before maturity , can we do. Wht will be procedure in general.

2.Whether it will get re newd automatically..

3. What will happen to the ineterest part. Whther it will be added to the FD amount on renewal or will be paid back to the person who is given the FD. 

This arrangement is against the BG is to be given.

Warm Regards






 3 Replies

Kumar Doab (FIN)     21 July 2016

Discuss the T&C that you intend to have with Bank.

JustAdvisor (IT)     21 July 2016

i would suggest go for a bank guarantee from a nationalised bank

Mohan Shandilya (Senior Managing Partner)     22 July 2016

"LIEN FDR" in favour of your company is at par with a BG. 

You can encash the said 'Lien FD' strictly as per the terms agreed, so make sure that right is incorporated in the Terms & Conditions while accepting the said 'Lien FD'.

You need to specifically ask for the sadi 'Lien FD' to be RIP (Re-Investment Plan) for it to be automatically renewed upon each expiry.

Interest on a RIP FD gets re-invested on accrual (quarterly basis), and you get the principal plus the interest accrued thereon upon maturity or encashment as per the Terms & Conditions agreed between the parties thereto.

'Lien FD' in your favour is far better than a BG.

I hope your query is answered to your satisfaction.

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