Collateral

Collateral is an asset — such as property, securities, gold, fixed deposits, or receivables — pledged by a borrower to a lender as security for a loan or credit facility, giving the lender the right to seize and liquidate the collateral to recover outstanding dues if the borrower defaults on repayment obligations. Collateral reduces the lender's credit risk by providing a secondary source of repayment beyond the borrower's income or cash flows, typically enabling borrowers to access larger loan amounts, longer tenures, or lower interest rates than unsecured credit. Common forms of collateralised lending in India include home loans (property as collateral), loan against shares or mutual funds, gold loans, and working capital loans secured by inventory or receivables. Under SARFAESI Act, 2002, Indian lenders have streamlined powers to enforce collateral without court intervention. For investors on Ventura Securities who use margin trading or loans against securities, the collateral maintenance ratio and margin call mechanics are critical risk parameters that must be actively monitored to prevent forced liquidation of investment positions in adverse market conditions.