RBI/2006-2007/290
UBD.
(PCB). BPD.Cir No: 33 /13.05.000/2006 March
16, 2007 The Chief Executive Officers of
All
Primary (urban) Co-operative Banks Dear Sir/Madam, Grant
of Loans for acquisition of Kisan Vikas Patras (KVPs) - UCBs We
have recently come across certain instances where banks had sanctioned loans to
individuals (mostly High Networth Individuals-HNIs) for acquisition of Kisan Vikas
Patras (KVPs). The HNIs were first required to bring in 10% of the total
face value of the proposed investment in the KVPs as margin and the remaining
90% of the investment was treated as loan and funded by the bank for acquisition
of the KVPs. Once the KVPs were acquired in the borrower’s name, the same
were pledged thereafter to the bank. 2.
The sanction of loans as described above is not in conformity with the objectives
of small savings schemes. As banks may be aware, the basic objective of
small savings schemes is to provide a secure avenue of savings for small savers
and promote savings, as well as to inculcate the habit of thrift among the people. The
grant of loans for acquiring/investing in KVPs does not promote fresh savings
and, rather, channelises the existing savings in the form of bank deposits to
small savings instruments and thereby defeats 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. 3.
Please acknowledge receipt to the Regional Office concerned. Yours
faithfully, (N.S.Vishwanathan)
Chief
General Manager in-Charge |