The reason Indian banks ask for a blank security cheque is because it is quicker for the bank to recover their money by filing a case for dishonour of cheque (Section 138 of the Negotiable Instruments Act) rather than filing a regular case for recovery of home loan. Since they have no idea of when (if ever) the borrower will default and what will be the outstanding loan amount at that time, they ask for a blank cheque. If there is a default that is serious enough for them to take legal action they first ask for the immediate repayment of the entire loan amount (under the home loan agreement they are allowed to ask for repayment of the whole loan in case of default) and then fill in the relevant amount in the blank security cheque and try and encash it. In all likelihood it will get dishonoured and the lender will then be able to file a suit for dishonour of the security cheuqe.
Is it risky to provide this cheque? Not as long as you provide it to a recognised bank or home finance company. They are governed by either RBI or NHB and will not be able to get away lightly if they try and present a cheuqe which is not due.
Bank asks for blank security cheque for home loan disbursement, is this correct?
if this is some sort of online loan, i'd say no.
if it's a bank you are actually physically visiting to work the loan out, then, maybe.
Bank asks for blank security cheque for home loan disbursement, is this correct?
nothing wrong in that ; as long as u dont do that with a private money lender.
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