What Is Lien Amount: Meaning, Reasons and Removal Process

Pallavi was scrolling through Instagram when a pair of boots caught her eye. She checked out quickly, only to see a message she didn’t expect: insufficient balance. Confused, she checked her account and learned that part of her money was temporarily blocked by the bank. That blocked portion is called a lien amount.

A lien amount isn’t a penalty or a loss of funds. It’s usually a temporary hold placed for specific reasons and can be removed once the issue is resolved. This blog explains what a lien amount is, why banks impose it, and how you can get it cleared smoothly.

What Is a Lien Amount?

A lien amount is a temporary hold placed by banks or financial institutions on funds in an account for security or financial reasons. The amount is put on hold so it can be used later to repay the dues. You cannot withdraw or use the blocked amount until you clear the obligation.

It is important to know the lien amount for multiple reasons:

• Ownership rights:  The lender has a legal claim on your asset until you pay off the balance. This affects your ability to refinance or sell the property
• Planning your finances: When you know your lien balance, you can plan your budget and how to pay off debts easily
• Affects credit score: Lenders consider your total debt compared to available credit. A higher lien affects your credit score. A lower one improves your financial profile
• Approval for loans: Lenders view your lien balance when you apply for a loan. A higher lien balance makes it harder to get loan approval

Why Do Banks and NBFCs Place a Lien Amount?

The lien amount serves as security for your dues. Here are the reasons why banks and NBFCs impose a lien amount:

Loan EMI Defaults

If there is a missed or delayed EMI payment on your account, banks may impose a lien on your account. This amount will help them recover the amount due if you fail to pay the EMI even after multiple reminders.

Credit Card Outstanding Dues

The credit card defaults have jumped by 28.42% to ₹6,742 crore in the 12 months ending on December 2024. So, in such cases, a certain portion of the bank balance will be subject to a lien.

Tax Dues or Government Orders

If tax authorities such as the GST (Goods and Services Tax) Department or the Income Tax Department instruct your bank, the funds in your account will be marked as a lien. The lien balance will be used to clear your tax dues.

Court/Legal Orders

If there are legal claims and banks receive a court order, they will place a lien on some account balances. This helps in maintaining compliance with the court’s order and settling the disputes.

Disputed Transactions

When you raise a dispute for a transaction, banks apply a lien for the temporary credit posted on your bank account.

IPO Applications via ASBA

When you apply for an IPO via Application Supported by Blocked Amount (ASBA), the application amount is kept as a lien amount. The amount is kept on lien on the application day and debited on the day of allocation. If the allocated amount is less, the balance is released from the lien.

Mutual Fund Lien

When you take a loan against your mutual funds, the respective units are marked as a lien. You cannot sell or redeem the units until you pay the loan.

NBFC Recovery or Security Obligations

When you keep an asset, such as your property, as a mortgage when applying for a loan via an NBFC, the asset is kept as a lien. It works as a security and recovery tool in case of default in payment.

Unpaid Bank Charges or Fees

If you do not pay bank penalties or fees on time, banks may impose a lien on your account.

Also Read -Types of Loans: 8 Different Types You Should Know

How to Clear or Remove a Lien Amount From Your Bank Account

Check your bank statement or net banking to get details on the lien. See if the lien is due to unpaid amounts, taxation issues, or disputes.

Clear Your Dues

If the lien is due to outstanding dues, here’s what to do:

• Pay the outstanding amount.
• Request the bank to remove the lien
• Make sure to get a confirmation in writing

If the lien is due to wrongful charges, raise a dispute with the bank.

Also Read - What is a Personal Loan? Meaning, Benefits & Uses

Submit Required Documents and Payment Proofs

Your bank may ask you for relevant documents to lift the lien. For example, you might need a loan closure letter, a lien release letter, or a No Objection Certificate (NOC) from the lender to remove the lien.

Submit these documents along with payment proofs to your bank.

Visit a Bank Branch or Use Net Banking Services

Submit a lien removal application by visiting a bank branch or through net banking services. Make sure to carry your account and ID details with you.

Contact Customer Support for Manual Removal

• Raise a request with the customer support to remove the lien or ask them about the process
• Track your ticket number until you get a solution

Follow-up

The bank verifies your application and removes the lien automatically if the issue is resolved. If the lien is not removed within 7-10 working days, follow up with them for an update. 

Legal Resolution for Court-Ordered Liens

If the court orders the lien:

• Consult a legal or financial advisor
• Submit the compliance documents or NOC to your bank. Without clearance, banks cannot remove a court-ordered lien

Tips to Avoid Getting a Lien on Your Bank Account

To maintain your financial health, it is necessary to avoid getting a lien on your bank account. Here’s what you should do:

• Pay EMIs on time, preferably before due dates
• Track your account regularly to identify unusual holds or deductions
• Clear credit card dues on time
• Maintain enough dues in your account for auto-debits
• Track tax payments. Check the official notice or communication regarding tax obligations
• Avoiding disputed transactions. Confirm the transaction before raising a dispute, and secure your credit card and bank details
• Regular communication with the bank/NBFC to check for errors. Be clear about payment delays

Also Read - What is Personal Loan Application Process | Step-by-Step Guide to Approval and Verification

Manage Lien Amount to Keep Your Finances on Track

A lien amount helps in the recovery of outstanding dues. While it restricts your access to funds or assets temporarily, it does not mean a loss of ownership as long as you settle the dues on time. Timely payments, regular account monitoring, and clear communication with financial institutions will help you avoid liens and ensure access to your funds and assets.

When you are short of funds and struggling to meet expenses, a personal loan can provide timely support without disrupting your existing finances. Hero Fincorp offers a seamless, paperless personal loan process with quick approvals. Apply today!

Frequently Asked Questions

What exactly does the lien amount mean in banking?

A lien amount in banking is the amount held for security reasons. This amount is later used to pay dues in case of default.

Can I withdraw funds under the lien amount?

You cannot withdraw funds under the lien amount until you clear the debt. In case of a court-ordered lien, you cannot use funds until the issue is resolved.

How long does a lien typically stay on my account?

A lien stays on your account until the issue, such as dues, tax obligations, or court-ordered liens, is resolved.

Can lien amount removal be done online?

Yes, most banks address partial queries related to lien online.

Does the lien amount affect my credit score?

If the lien is due to unpaid dues, it affects your credit score. But minor violations do not affect your credit score immediately, as it depends on the type of lien and the policies of the credit bureau.

What documents are needed to clear a lien?

The documents to clear a lien depend on the reason for which the lien was issued.

Will I earn interest on a lien-blocked amount?

Yes, you can earn interest on your lien-blocked amount. The lien-blocked amount is still a part of your account balance.