What is Lien Balance in Bank Account? Meaning, Reasons & How to Remove It

When you look for what is lien balance in bank account, you get a variety of answers, but to put it simply, it is a certain sum in your bank account that is temporarily frozen or blocked by the bank. This means you’ll see the money in your bank balance, but you won’t be able to use or withdraw it until the lien is paid off. It usually becomes a problem in situations like:

• IPO applications
• UPI AutoPay mandates
• Failed EMI deductions
• Credit card dues
• Minimum balance holds
• Loan-related recovery

But what is lien balance in the bank account, to be exact? What are the reasons behind it? How can you remove the lien? In this guide, we are going to answer all those concerns. We will explain what is lien balance is and how you can remove it from your bank account.

What is the Lien Amount?

The lien amount meaning is the actual amount in your bank account that is temporarily barred or frozen by the bank. That means the money will show up in your bank balance, but you can’t use or withdraw it until the lien is released. A bank lien meaning is usually imposing a hold or freezing funds in your bank account so they can be used to pay dues or meet specific financial obligations later on.

Technically, a lien is the bank's legal right to hold/reserve funds in your account to recover dues or settle obligations. A lien hold in bank account might happen in several instances, like you have an overdue loan EMI, a pending credit card payment, or you have applied for an Initial Public Offering (IPO).

Let us take an example to grasp the concept of lien amount better. Suppose you have ₹1 lakh in your savings account. Your bank has put a lien of ₹15,000 on it because of some unpaid credit card debt. Your bank balance would still be ₹1 lakh, but the usable balance becomes ₹85,000 till you clear the dues or the lien is removed. 

What is a Lien in Banking?

In banking, a lien is a legal right granted to a bank over a customer's property to secure the payment of a debt or other financial obligation. It stops the account user from accessing or withdrawing the tagged funds until a particular debt or obligation is paid off. The sum that is put under lien is known as lien balance in bank account. The money stays in your account balance, but you can't withdraw it or move it until the lien is released.

You need to understand that a bank lien is not the same as a bank account freeze or block. A lien is a legal claim against a certain sum of money in a bank account. A freeze or block is a situation where the bank suspends any activity in an account. This is frequently done because of problems like suspected fraud or non-compliance with the bank’s order. If a lien is placed, you can still access the remaining account balance. But a freeze locks the whole account.

Another word that borrowers are sometimes confused with is “charge of lien”. It is the legal right of the lender on the asset or property of the borrower till the whole outstanding amount is paid. It assists the lender in recovering dues in case of borrower default. 

Note: A debit freeze vs lien are both different. In a debit freeze, there is a complete halt on all debit transactions.

Types of Liens Banks Place on your Account

Having understood the lien amount definition, now let’s get to the forms of liens in banking. Depending on the circumstances and the purpose of the lien, it might be any of these types: 

1. Temporary Lien

Temporary liens are conditional and are generally short-term restrictions that are placed on an account or an asset. They get automatically removed once a specific expected transaction is completed, and the brief obligation is cleared. 

2. Permanent Lien 

These liens remain on an asset until the entire underlying debt or legal judgment is fully satisfied. These generally occur against FD and are generally imposed due to litigation on unpaid legal judgments. 

Why Banks Mark Lien Balance?

Your bank might put a lien on your account balance for many reasons. They might be voluntary or involuntary and usually signify that your bank has placed a temporary hold on some of your money. It might be a legal punishment imposed by a regulatory authority or a consensual move for a financial conduct.

Here are several legitimate causes for the quantity of lien in your bank account: 

1. Loan EMI Due 

If you had missed her minute installment that was scheduled a while back, there is a chance that you will place a lien on your savings or fixed deposit. 

2. Credit Card Outstanding 

If you fail to pay your credit card bill on time by the due date, then the bank on your bank account 

3. IPO Application Hold 

Can you apply for an IPO through your trading or bank account? The application amount is temporarily blocked. You cannot use the funds until the entire IPO allotment process is finalized. 

4. UPI Autopay Mandates 

When you set up recurring UPI autopay for services or bills, your bank generally marks a lien on the authorized amount so that it is for automatic deduction on the due date. 

5. Minimum Balance Requirement 

If your account falls below the requirement, and on your account. It acts as a penalty on the hold of the shortfall account. 

Difference Between Lien Balance & Available Balance  

There is a major difference between the lien balance and the available balance. They are:

How to Check the Lien Balance in your Account?

Knowing the amount of the lien in advance avoids payment failures or surprises. There are a few methods that you can use to check the lien balance in your bank account.

1. Check for SMS or email alerts

Banks typically send you an SMS or email alert when they place a lien on your account. Please check your mailbox for any messages or notices that inform you of the current balance in your bank account.

2. Net banking portal

You might also log in to your online banking account and check your lien balance there. It should be shown individually under your account balance section. If not, go to “Account Summary” and click on the “Lien details” or something similar to check your lien amount. Distinct banking portals offer distinct interfaces and options.

3. Mobile banking application

You may also view your lien balance in your account through your mobile banking app. The approach is similar to that for the web portal. Log in to your mobile banking and click on “Account Summary” under the “My Accounts” section. We will show you your total available balance and the lien balance.

4. Account statement

Your lien amount is also listed on your monthly account statements. Search for an entry that clearly says “Lien Marked” or “Amount Under Lien”. If you don’t have your bank statement, you can download it from your online banking site, or you can have it emailed to you by contacting your bank’s customer service team.

5. Branch Visit

You may simply visit the local branch of your bank and ask about the lien balance in your account. The bank representative will provide you with the essential details. 

How to Remove a Lien from your Account?

If you find that your bank account has a lien on it, you want to take steps to get it removed. Below is a step-by-step process you can use to remove a lien:

• Determine the rationale: First, you need to find out why the lien was placed on your account balance. Is it a loan default? Is it tax dues? Or something else? Is it a choice?
• Pay the requisite payment(s): If the lien amount is for a pending loan EMI or credit card dues, make the due payment(s). The bank will automatically release the lien when instructed to do so by the lender.
• Reach out to your bank: In case the lien is not removed, or if there is any technical error, reach out to your bank’s customer care team to inquire how to remove the lien.
• Submit the necessary documentation: Sometimes, your bank will require you to submit some paperwork to remove the lien from the bank account. For example, a loan closure letter, a No Objection Certificate (NOC) from the lender, or a lien release letter.
• Follow up if necessary: The lien will be removed automatically once the bank confirms that the problem has been rectified. However, if it is still showing after seven to ten working days, please contact your bank.

Sometimes, the lien release process takes a little longer than intended. For example, at a time of continued loan return or unresolved legal case. If this is the case, remain patient and wait for the bank to release the lien. 

Lien Balance in SBI, Union Bank & Indian Bank 

Across banks, the terminology might differ. The table below just explains it a little more clearly.

Does Lien Affect CIBIL Score? 

Bank Lien does not directly affect your CIBIL score. But if the debt is not paid (such as missed loan EMI or failure to pay taxes), it does have an indirect impact on your credit score. The default and missed payments will remain on your credit report for years and will have a profound impact on your credit profile. 

Important Things To Know Before Contacting the Bank 

There are some important things that you need to know before you contact the bank about your lien.

Conclusion

A lien balance is generally a temporary hold, and it is a very important thing, not a deduction, though there are many reasons why the panic can occur. Most liens are cleared after the dues are settled or any kind of mandates have expired. Make sure you monitor banking apps carefully and check any form of mandates and EMI schedules. This issue can be avoided with proper planning.

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