Lien Amount is a term commonly used in the banking sector. Most account holders are unaware of what the term means until they face it. Simply put, a lien amount is the portion of funds in your bank account that is frozen due to a pending financial obligation. The lien amount stays frozen in your account till the issue is resolved. Understanding what a lien is, why it occurs, and how to remove it from your account is very important for maintaining healthy credit and conducting your financial transactions without disruptions. 

What is Lien Amount? 

The lien amount is the amount the bank marks or holds against your account as security. The amount gets frozen in your account and cannot be accessed by you until you have resolved your pending financial obligation. This is to ensure the bank has a clear process for recovering the funds due from your end. The due amount could be in the form of loan EMIs, credit card bills, taxes, and so on. The remains are frozen with the bank until the bank authorities decide to remove the lien amount balance.   

Meaning of Lien Amount in Banking 

In the banking world, a lien is a temporary hold on funds or assets by the bank. In the context of home loans, a lien is a temporary hold on the property until the loan is repaid. According to reports by the Reserve Bank of India, banks in India hold a lien of 30% of all the registered properties. In most home loans, the average lien amount is Rs. 1.2 crores per property.  

In the banking sector, a lien serves as a safety net for the bank. In other words, it is a way to reduce the risk associated with loans. When it comes to home loans, banks use the home as collateral to recover the funds in the event of default. 

Common Reasons for Lien Amount in Bank Account 

The following are common reasons for a lien on a bank account. They are:  

  • Home Loans: When you take a home loan, banks place a lien on the property till your home loan is repaid.   
  • Savings/Current Account: In case you have failed cheque balances or minimum balance violations, banks place a lien on the failed cheque payments.  
  • Credit Card Balance: If your credit card bill is unpaid for a long time, the bank may place a lien in your linked savings account, restricting access to those funds until the outstanding balance is cleared.  
  • Tax Penalties: There are cases where there are pending taxes and legal penalties from your side. In such cases, Government authorities can instruct banks to mark a lien on your bank account for unpaid taxes or various legal penalties.  
  • Fraudulent Activities: If the bank finds any fraudulent activities in your bank account, they may lay a temporary lien on your account.  
  • Legal or Court Orders: Courts can instruct banks to place a lien on your account and freeze it in the event of a legal dispute, making the funds inaccessible until the court’s instructions change.  

How Does a Lien Affect Your Bank Account? 

A lien restricts a portion of your bank account, freezing it to secure a debt. This could be in the form of an unpaid loan or credit card bill. You cannot withdraw the amount stipulated as the lien amount, but you can withdraw an amount exceeding the lien amount. Over time, frequent liens or the various underlying debts will ultimately affect your credit score.   

The following are some of the ways in which a Lien affects your bank account. They are:  

  • Restricted Funds: The direct implication is that a portion of the funds in your bank account is frozen. This prevents you from withdrawing or using it.   
  • Use of Funds: You may use any remaining funds in your account beyond the lien amount.   
  • Impact of Automatic Payments: If you have an auto-debit set up on your account, you must maintain funds in your account beyond the lien amount. If you fail to make the other payments, you may incur late payment fees if the account has no available funds.  
  • Credit Score Damage: A lien can hurt your credit score. This is due to missed EMI payments or bill defaults. 

Types of Liens in Banking 

A lien can be classified into various categories based on the nature of the claim and the manner in which it is created.   

  • Voluntary Lien: This lien is created when a borrower pledges an asset as collateral for a loan.  
  • Involuntary Lien: After the non-payment of loans, debts, taxes, or due to a legal judgment, an involuntary lien is imposed on the borrower’s account. This lien is imposed directly by the Government or banking authorities.  
  • Specific Lien: As the name suggests, this lien is imposed on a specific asset that is held by the bank as security. In the case of a home or car loan, the bank has the right to the property or the car until the entire loan amount, along with interest, is repaid.  
  • General Lien: This lien is exercised by creditors in the event of non-payment of the loan. Banks, courts, and government authorities can use the general lien to recover unpaid debts. Creditors can also use a court judgment to seize assets in cases of unpaid debts.  
  • Statutory Lien: This lien is exercised by law or government under various legal obligations, such as tax defaults or unpaid service fees. This lien is generally imposed by the law or government.   
  • Equitable Lien: The equitable lien is common in cases of fraud, breach of trust, or various legal disputes. If a property is claimed fraudulently, the court exercises an equitable lien to compensate for the affected party. 

How to Check Lien Amount in Your Bank Account 

If case account has a lien amount, it is essential to verify the reason and the exact lien amount that is been blocked.  

  • Net Banking: Log in to your Bank’s account, check the balance details section, and the lien amount will be shown separately from the available balance. 
  • Mobile App: You can also check your bank’s balance through your mobile app. If there is a difference between the total balance and the available balance amount, the difference amount represents the lien amount. 
  • Physical Visit to the Branch: You can visit the nearby branch of the bank, get in touch with the bank’s representative, and ask them the reasons for the frozen amount on your bank account.  

Read Also: How to Check and Remove Lien Amount in SBI: Step-by-Step Guide

How to Remove Lien Amount – Step-by-Step Process 

Wondering how to remove the lien amount? Follow the steps below to have the lien removed. They are:  

Step 1: Contact the bank’s representative and ask why they placed a lien on your account.  

Step 2: If there is a lien due to a payment default on your end, clear the outstanding bills and settle the outstanding amount.  

Step 3: If the lien is due to unpaid taxes or other legal complications, provide the necessary clearance certificates.  

Step 4: Write to the bank authorities stating that you have cleared your dues and that the lien needs to be removed.  

Step 5: Ensure the bank successfully updates your account and removes the lien amount. 

Step 6: Processing time for removing the lien is around 5 to 7 working days.  

How Long Does It Take to Remove a Lien?  

  • Duration for Removing a Lien: Lien removal might take anywhere from a few weeks to a few months, depending on the lender and the asset. It can take a bit longer if there are discrepancies.  
  • Representative Processing Time: The time to have the lien removed from your account will vary. The government and legal authorities will take time to get the lien amount removed from your account.  
  • Key Determinants of Processing Speed: There may be delays in paperwork, missing signatures, or issues with loan closure, all of which will take time.  
  • Verification Process: Check with the bank concerned whether the documentation has been submitted to the due authorities. There might be delays from the lender’s end that will add time to the process.  
  • Legal Intervention: In extreme situations, you may request legal intervention to remove the lien amount. True when the lender does not comply with the lien removal request.  

The table below lists the time required to remove a lien from the bank account. 

Bank Type 

Average Processing Time 

Public Sector 

Up to 7 working days 

Private Banks 

Up to 5 working days 

Digital Banks 

Up to 72 hours 

What Happens If Lien Amount Is Not Removed? 

If the lien is not removed after the debt is paid, it may lead to significant problems.   

  • Your assets can become a dead investment.  
  • You will be unable to sell or refinance your assets.  
  • You restrict your access to funds.  
  • Auto-debit transactions may be affected by insufficient funds.  
  • You will have a negative impact on your creditworthiness.  

To resolve this, contact the lender and request that the lien or lien amount be removed.  

How to Avoid a Lien in the Future  

To prevent a lien from being placed in your bank account, you need to maintain consistent financial discipline and stay compliant with your financial obligations. Some of the effective steps that need to be adhered to are given below:  

  • Maintain Minimum Balance: Always maintain the required balance to avoid payment of penalties that could lead to a lien.  
  • Pay Dues on Time: Ensure timely payments of EMIs, credit card bills, and loan installments to avoid lien amounts.  
  • Monitor your Accounts Regularly: Keep a track of all your savings accounts to avoid any irregular deductions or pending dues early.  
  • Avoid Dormant Accounts: Keep your accounts active to prevent unwanted holds or compliance-based freezes.  
  • Resolve Disputes Amicably: If there are payment defaults on your part, try to resolve the issues amicably and avoid a lien. 

Conclusion 

Understanding a Lien amount is very important for effective financial management. It helps you to stay aware of the various restrictions on your bank funds and take timely action. Clearing the unpaid dues, taxes, and any other legal implications will help you to remove the restrictions on the lien amount. Effectively having a clear understanding of lien amounts and how to remove them ensures better control over your finances and smoother banking transactions. 

Disclaimer: This page includes information that has been compiled from many sources and is only offered for informational purposes. Given that this type of data may change over time, we cannot guarantee the accuracy of the information supplied or included within it. It is anticipated that the user will confirm with the relevant source before making any choices or taking any actions.