RBI warns co-op banks on loans against Relief Bonds

Banks beware. Even the Relief Bonds submitted as collateral for raising loans could be fake. The Reserve Bank of India (RBI) has asked urban co-operative banks to exercise caution while sanctioning loans against Relief Bonds.

The central bank has sounded the caution as a few instances of fake bonds have come to its notice.

It also pointed out that many banks were not getting these bonds transferred in their own names before disbursal of loans.

Recently, the RBI has come across a case where a person, reporting himself to be an agent of the bond holder, had submitted a colour xerox copy of the bond for signature verification of the bond holder. Such practices, intentionally or unintentionally, could lead to frauds, the RBI warned.

RBI has said that Relief Bonds can be held by any banking company if the instrument is transferred in the name of bank for the limited purpose of obtaining advances against the security of such bonds. However, no third party loans can be sanctioned against Relief Bonds.

Some of the banks have also reported that the bonds pledged with them but not transferred to their name have been lost, an RBI release said.

"There is an urgent need for banks to introduce a control mechanism so as to ensure that sanction of loans from different banks against the same bond is prevented," it said.

"There is no provision to record a lien of the lending bank against a government security including bond ledger account. In case the lending bank would like to have the government security as a collateral, it has to be got transferred in its name," the RBI added.

While clarifying that relief bonds issued in different series will be eligible securities for sanction of loans, the RBI said that many banks have not got these bonds transferred in their own names before disbursal of loans.

These banks refer the matter to the public debt office of the RBI and specified branches of agency banks after a lapse of two-three years from the date of sanction of loan or after the bond has matured for repayment.