A custodial pledge and security agreement is one that is entered into by a borrower with a bank in order to obtain a loan. The security that has been pledged by the borrower is given in the physical custody of the bank unlike other pledge agreements where only documents are pledged. This type of agreements usually in existence in shipping yards where the stock in the shipyard belonging to a company is pledged to the bank to secure a loan. The security that is commonly accepted as a security under this type of agreement is only movable property such as raw materials, work in progress etc of a company.
The contents of the custodial pledge and security agreement are details of property that has been pledged as security in the custody of the bank. Some of the other details that included in the agreement are period of loan, details of the borrower, location of security that is being pledged, market value of security etc.
CUSTODIAL PLEDGE AND SECURITY AGREEMENT
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