What is Fixed Charge?
A Fixed Charge is a charge created on identifiable, specific assets — such as a particular building, machine or piece of land. The borrower cannot dispose of the asset without the lender's consent. It gives the strongest security position to the lender.
| Meaning | A Fixed Charge is a charge created on identifiable, specific assets — such as a particular building, machine or piece of land. The borrower cannot dispose of the asset without the lender's consent. It gives the strongest security position to the lender. |
|---|---|
| Category | Banking |
| Related Laws | Transfer of Property Act 1882, Companies Act 2013 |
| Who Uses It | Banks, borrowers |
| Why It Matters | Lender has direct control over the secured asset. |
Fixed Charge explained in plain English
A practitioner's view written for borrowers and advisors — not a textbook definition.
A Fixed Charge is a charge created on identifiable, specific assets — such as a particular building, machine or piece of land. The borrower cannot dispose of the asset without the lender's consent. It gives the strongest security position to the lender.
In practice, Fixed Charge is used most often by banks, borrowers. Each of them sees the term from a slightly different angle: borrowers care about protection and outcomes, lenders care about classification and recovery, regulators care about consistency and disclosure.
The legal anchor for Fixed Charge is Transfer of Property Act 1882, Companies Act 2013. RBI master directions, the SARFAESI Act 2002, the RDB Act 1993 and the IBC 2016 commonly interplay, depending on the loan size, security and stage of stress.
Why does it matter? Lender has direct control over the secured asset. For a stressed borrower, getting this concept right early often saves several months of penal interest, legal cost and credit-score damage.
A real example: A fixed charge on a specific factory shed secures a ₹20 crore term loan. The mechanics may look complex, but the underlying logic — the bank wants closure, the borrower wants a fair outcome — is straightforward once the right framework is in place.
If you are facing a situation involving Fixed Charge, the safest first step is a structured case review with a senior ex-banker who has handled comparable matters across banks and ARCs in India.
Where you'll encounter Fixed Charge
Whenever a loan moves from "Standard" to "stressed", Fixed Charge is one of the words that starts appearing in notices, bank emails and lawyers' opinions.
Sanctioning committees, recovery teams and risk officers use Fixed Charge to classify accounts, decide provisioning and approve resolution paths.
Fixed Charge appears in pleadings, securitisation applications, OAs, Section 7/9 petitions and SARFAESI writs as part of the dispute record.
When stressed loans are sold to ARCs or special-situations investors, Fixed Charge is used in term sheets, assignment agreements and due-diligence reports.