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Advances Against Security Of NSC / KVP

Preamble

  • Banks have been providing financial assistance to the individuals by way of advance facility against security of NSC/KVP.
  • Maximum assistance to be sanctioned at branch level will not exceed Rs. 1.00 Lac per borrower. Proposal exceeding Rs. 1.00 Lac will be sent to HO/CEO for sanction.
  • Each advance shall not be lower than Rs. 5,000/-.
  • The margin would be 15% to 25% on the present maturity value of completed years..
  • Margin for newly purchased NSCs/KVPs – 40%
  • These margins will also apply to staff members.
  • Re Payment of Loan/Advance against NSC/KVP should be paid within 36 months maximum.

Appraisal Requirement

  • Financial assistance against security of NSC/KVP is considered safe and secure since these are Government Securities and repayment is assured. Thus, the appraisal does not require examining the viability of the proposal or assessing the needs of the borrower. The only aspect that is considered is that the certificates must be genuine and there should be adequate margin to cover the interest liveable during the period till date of encashment.
  • The National Saving Certificates / KVP have to be marked for lien with the issuing Post Office. The practice of getting the lien marked is an important activity and the branches must ensure that our own employee gets the lien marked from the Post Office. The borrower will not be allowed or given possession of the certificates, to get the lien marked from the Post Office. This may lead to risk of fake certificates being given to the Bank as security.

General Precautions Required

  • (A) The Branch Manager should take the following precautions while considering loans against NSC.
  • The borrower seeking the advance / loan should be genuine.
  • The certificates which are kept as security must be examined and be subject to thorough scrutiny from various angles.
  • The Bank’s staff must be given the responsibility of getting the lien marked.
  • The quantum of loan should be within the stipulated limit and in no case margins be reduced.
  • (B) Grant of loans for acquisition of / investing in small savings instruments including Kisan Vikas Patras :
  • Grant of loans for acquiring/investing in KVPs does not promote fresh savings and, rather, channelize the existing savings in the form of bank deposits to small savings instruments and thereby defeat the very purpose of such schemes. Banks may therefore ensure that no loans are sanctioned for acquisition of/investing in small savings instruments including Kisan Vikas Patras.