Banks can give loans on the security of goods or documents of tittle viz.. Railway Receipt, Bill of Lading, Dock Warrant etc. Merits of such collateral's are quite easy to sell, loan being short-termed, risk of loss is not great, and there is no danger of money being drowned. Demerits are:
- Difficulty in getting suitable accommodation for warehousing of the goods.
- Risk of damage to good.
- Goods in the category of comfort and luxury are subject to violent fluctuations.
- Difficulty for bank to release goods in installment.
- Documents may be forged.
It is, therefore, essential that banks should keep a proper margin between the amount of loan and the price of goods.Only such goods as can be sold quickly should be accepted as security.
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