There is no legal definition of 'negative lien'. Lien is the right to retain goods of a
borrower or pledgor for the debt. Negative Lien is used in banking parlance for a
borrower to undertake not to create any charge on his property without the consent
of the lender.
The borrower may sometime be having non-encumbered assets which are not
charged to the bank as security. The borrower is thus free to deal with these assets
and may even sell them if he so desires. To restrict this right of the borrower, bank
may sometimes request him to give an undertaking to the effect that he will neither
create any encumbrance on these assets nor sell them without the previous
permission of the bank so long as the advance continues.
