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H.O./CIR.NO 11/2005                                                                                                                                                                     Dated: 16.11.2005 

TO ALL OFFICES 

REG :     ADVANCES AGAINST POSTAL SECURITIES

          - NATIONAL SAVINGS CERTIFICATES (NSCs),

                             - KISAN VIKAS PATRAS (KVPs) 

 Detailed guidelines in respect of advances against Postal Securities i.e. National Savings Certificates (NSCs), & Kisan Vikas Patras (KVPs) have been circulated to the branches from time to time. 

To obviate frequent references to various circulars, operative instructions have been consolidated and are available in Annexure. 

All concerned are advised to note the enclosed guidelines for compliance.

General Manager

INDEX: ADVANCES  AGAINST  POSTAL SECURITIES – NATIONAL SAVINGS CERTIFICATES (NSCs), KISAN VIKAS PATRAS (KVPs)                                                   

Annexure

SCHEME FOR GRANT OF ADVANCES AGAINST THE SECURITY OF

NATIONAL SAVING CERTIFICATES (NSCs)

4.   RATE OF INTEREST

Interest rate as advised vide L & A Circulars issued from time to time.

5.   LOANING POWERS

Loaning Powers for sanction of such advances be exercised as advised vide H.O. Circular  No.2/2005 dated 14.9.2005.

6.   DOCUMENTATION

Demand Loan 

i)      Demand pronote PNB 728 stamped.

ii)     (a)  Payment voucher duly receipted across Re.1 revenue stamp.

     (b) Certified true copy of the payment voucher for day book (not to be signed      by the borrower).

iii)     Application for advance for shares and Government Securities PNB 334.

iv)     NSCs duly pledged/transferred in favour of the Bank.

v)       Letter of Lien PNB 308

Overdraft

i)   Overdraft agreement PNB- 727 A (Stamped).

ii)  Application for advance for shares and Government Securities PNB - 334.

iii) AOF and specimen signature slip.

iv)  NSCs duly pledged/transferred in favour of the Bank.

7.     General Guidelines/Safeguards

i)                   Transfer of postal certificates/postal deposits and their pre-mature                                             encashment are governed by Rule 19 and Rule 21 which are available at    Appendix -I.

ii)                 Interest accrued on NSCs may be reckoned for computing the value of security and granting advances thereagainst to PUBLIC as well as STAFF.  While arriving at the value of security, interest accrued upto the completed years from the date of purchase of NSCs may be taken into account.  Branches should ensure that at no time outstanding in Overdraft/Loan Account against such security exceeds the value of security.

YEARLY ACCRUED INTEREST ON NSCs ( VIIITH ISSUE)

PURCHASED UPTO 31.12.1998

YEARLY ACCRUED INTEREST ON NSCs ( VIIITH ISSUE)

PURCHASED ON OR AFTER 1.1.1999

YEARLY ACCRUED INTEREST ON NSCs ( VIIITH ISSUE)

PURCHASED ON OR AFTER 01.03.2003

iii)           Branches should ensure that lien on NSCs is marked by sending the same through registered post or through a staff member and in no case such certificates be handed over to the borrower/third party for getting the lien marked in favour of bank.  It is also reiterated that loan against such securities should be disbursed only after complying with formalities prescribed by the bank and getting the bank’s lien marked on the securities.

iv)            Advances against National Savings Certificates may also be allowed   to a                  third party.

v)            National Savings Certificates need not be discharged by the borrower/holder for getting loan from the bank and the payment from the Post-Office in case of default (without discharge) can be claimed by the Bank after giving certificate `Security forfeited.

vi)      On repayment of the entire dues by the borrower, the securities i.e. NSCs are to be released, for which a letter addressed to the respective Post Office stating "Security released in favour of holder" may be given to the holder of the securities to enable him/her to get the repayment from the post office.

vii)           Where a Savings Certificate is held by or on behalf of any person as a pledgee or by way of security for any purpose, such holding shall not have the effect of canceling a nomination but the right of the nominee shall be subject to the right of the person so holding it. In the event of the bank holding the Savings Certificates as a pledgee the fact there is a nomination in respect of such certificates and the nominees' names are mentioned on the face of the certificates, would not effect the right of the bank so holding the certificates. The nominee gets the right to receive payment of the same due on the Savings Certificates only on the death of the holder thereon. The holder of the certificate is always entitled to cancel the nomination or make any variation in respect thereof. Hence, advances should not be refused against certificates merely on the ground that they bear registration of the nominee on the face of them.

viii)    All heads of Postal Circle, Additional Directorate General, Army Postal Services have been issued instructions directing that a pledgee (Bank) being holder of the Savings Certificates under the National Savings Certificates VI/VII Issue Rule 1981 is entitled to receive payment of interest under the same.

ix)      Bank can act as an agent of the holder for collecting the periodical interest due on NSCs on which interest is payable periodically, i.e. yearly or half-yearly basis. This can be done either as an occasional arrangement or as a standing arrangement. Letter of Authority suggested by the P&T Department and required to be obtained from the pledger in case of both types of arrangements is given in Appendix II. 

x)       The following procedure may be adopted for collection of interest:-

a)             Occasional Arrangement.

          The bank is required to present the Certificates and a Letter of authority from the holder of the Certificate in the prescribed form (Appendix II). The bank is also required to furnish an endorsement on the letter of authority of the holder to the effect "Received payment. Beneficiary's account will be credited on realisation." At the time of receipt of payment, the bank will give discharge for the interest in the same form.

b)             Standing Arrangement.

The bank should present a letter of authority from the holder for payment of interest through the bank. In this arrangement, production of the Savings Certificates by the authorised bank will be necessary only on the first occasion of payment of interest to the authorised bank. Discharge for interest will be given on each occasion in this arrangement, in the form prescribed for receipt of interest.

xi)    Advances against the security of ‘National Saving Certificates’ may be allowed to the members/ex-members of staff and widows on honourably retired employees of the bank subject to all other terms and conditions for allowing advances against the security of ‘National Saving Certificates’ mentioned herein above.

xii)     In case of advances against securities standing in the name of minors, the same procedure as laid down for advances against Bank's own deposits must be followed.

************

SCHEME FOR GRANT OF ADVANCES AGAINST THE SECURITY

OF KISAN VIKAS PATRAS' (KVPs).

5.   Loaning Powers

Loaning Powers for sanction of such advances be exercised as advised vide H.O. Circular  No.2/2005 dated 14.9.2005.

6.   Documentation            

Demand Loan

 i)          Demand pronote PNB 728 stamped.

 ii)      (a) Payment voucher duly receipted across Re.1/- revenue stamp.

     (b) Certified true copy of the payment voucher for day book (not to be            signed by the borrower).

iii)            Application for advance for shares and Govt. Securities - PNB-334.

iv)      Letter of Lien - PNB 308.

v)       KVPs duly pledged/transferred in favour of the bank

Overdraft

 i)             Overdraft  agreement PNB- 727  A (stamped).

ii)            Application for advance for shares and Government Securities PNB-334.

iii)      AOF and specimen signature slip.

iv)      Letter of Lien - PNB 308.

v)       KVPs duly pledged/transferred in favour of the bank.

7.          GENERAL GUIDELINES/SAFEGUARDS 

i)                   Advance Against KVPs may also be allowed to a third party.

ii)                Interest accrued on KVPs may be reckoned for computing the value of security  and granting advances thereagainst to Public as well as Staff.  While arriving at the value of security, interest accrued upto the completed years from the date of purchase of KVPs may be taken into account. Branches should ensure that at no time the outstanding in Overdraft/Loan account against such security exceeds the value of security.

iii)              To guard against fraudulent attempts, while making advance against the security of KVPs, utmost caution is required to be taken by the branches besides strictly observing the safeguards laid down by the Bank, which are as under:

-         Branches should ensure that lien on KVPs is marked by sending the   same through registered post or through a staff member and in no case such certificates be handed over to the borrower/third party for getting the lien marked in favour of bank.  It is also reiterated that loan against such securities should be disbursed only after complying with formalities prescribed by the bank and getting the bank’s lien marked on the securities.

-         To ensure that advance against KVPs are made to known   persons/parties.

-         To follow the procedure as prescribed by the Public Debt Office of RBI, Postal Authorities, etc. while granting advances against the security of such bearer securities.

-         To satisfy themselves as to the acceptability of the credit needs of the borrowers and end use of funds lent with sources of repayment and not be guided solely by availability of security.

iv)               Advances against the security of ‘Kisan Vikas Patras’ may be allowed to the members/ex-members of staff and widows on honourably retired employees of the bank subject to all other terms and conditions for allowing advances against the security of ‘Kisan Vikas Patras’ mentioned herein above.

v)                 RBI has informed that dependence on middlemen for any banking activity is fraught with risk and advised that bearer securities such as Kisan Vikas Patras be verified directly from the concerned issuing authorities.  Wherever, such persons are involved for canvassing of deposits or in the guise of loan consultants, their names and addresses may be noted in the related bank documents so that action can be initiated, against them or a data base built to ascertain their involvement in such cases.

vi)                Extract of rules 12 & 13 of the Kisan Vikas Patras rules 1988 regarding pre-mature encashment & encashment on maturity are given hereunder:

RULE 12 - Encashment on maturity:-

The maturity period of KVPs issued for any denomination shall be as under:-

Issued upto 31.12.1998             :          5 years 6 months

Issued on or after 01.01.1999          :          6 years

Issued on or after 01.03.2003          :          8 years 7 months

                     RULE 13 -  Premature encashment: -

1)             Notwithstanding anything contained in rule 12, a certificate may be prematurely encashed any time in any of the following circumstances:-

 a)        On the death of the holder or any of the holders in the case of joint holder.

b)      On forfeiture by a pledgee being a Gazetted Government Officer,

c)       When ordered by a court of law.

2)      If a certificate is encashed under sub-rule (1) within a period of one year from the date of the certificate only the face value of the certificate shall be payable and no interest shall be payable.

3)           Notwithstanding anything contained in rule 12 or in sub-rule (1), if a certificate is encashed any time after expiry of two years and six months from the date of certificate the amount payable inclusive of interest shall be as specified in the table below for denomination of Rs.1000 and at a proportionate rate for any other denominations: 

Appendix-I

RULES RELATED TO TRANSFER OF POSTAL CERTIFICATES & THEIR PREMATURE ENCASHMENT

 Transfer of postal certificates and their premature encashment are governed by Rule 19 and Rule 21 which are quoted below:-

RULE-19.

Pledging of Certificate:

i)        On an application being made in the form laid down by the Director General, Post & Telegraphs by the transferor and the transferee, the Post Master of the Office of Registration may at any time, before or after the period of its non-encashability permit the transfer of any certificate as security to -

a)       A Gazetted Officer of the Govt. in his official capacity;

b)      The Reserve Bank of India or a scheduled bank or a Cooperative Society including a Cooperative Bank;

c)       A corporation or a Government Company; and

d)   A local authority.

   ii)     When any certificate is transferred as security under Sub-rule (i), the Post Master of the Office of Registration shall make the following endorsement on the certificate, namely:-"Transferred as security to ........................ (official designation)". 

iii)               Except as otherwise provided in these rules, the transferee of a certificate under this rule shall, until it is retransferred under sub-rule (4) be deemed to be the holder of the certificate.

iv)               A certificate transferred under sub-rule (2) may, on the written authority of the pledgee be re-transferred with the previous sanction in writing of the authorised Post Master and when any such re-transfer is made, the Post Master of the Office of Registration shall make the following endorsement on the certificate, namely:- "Re-transferred to....................".

RULE-21.

Rule 21 refers to the period of non-encashability of the certificate. National Savings Certificate issued on or before  31.3.1986 can be pre-maturely encashed only after the expiry of 3 years from the date of issue. The certificates issued after 1.4.1986 cannot be pre-maturely encashed except under special circumstances, namely:-

a)   On the death of the holder/holders;

b)   When the holding is in excess of the limits prescribed under the rules;

c)   When the certificate has been issued in contravention of the rules; and

d)   When ordered by a Court of Law.

Appendix-II

LETTER OF AUTHORITY

The Post Master,

________________

________________

 Please pay to_________________________ Bank _______________________ Branch/Office the sum of Rs.___________ (Rupees_____________________)being the interest and other payments due to me, on the undermentioned National Savings Certificates held in my name.

                                             Yours faithfully,

(Signature of holder)

Station____________

Date_______________

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