Pledge Saving Bonds As Collateral To Raise Funds: RBI

Author: Pushpak Srivastava

The Reserve Bank of India in its effort to effectively deal with the financial crisis has now further relaxed some of its banking norms that would facilitate the people in raising funds from the cooperative banks in the urban areas by pledging a particular nature of saving bonds as collateral.

The RBI in an announcement specified the types of saving bonds that can pledged as collateral for attaining loans from the cooperative banks. The list comprises of 7 percent saving bonds, 2002, 8 percent taxable saving bonds, 2003, and 6.5 percent saving bonds, 2003. With this decision, the borrowers holding these government saving bonds can easily borrow money from the banks in the hour of their need.
	The holders of these bonds would be at liberty to create, hypothecation or pledge or lien in the favour of cooperative banks as per the Government Securities Act, according to RBI. However, earlier these financial instruments were not allowed to be used as collateral for raising money from banks and other financial institutions. The relaxation in terms of saving bonds would be available for obtaining loans and can be extended to the bondholders only. Third party loans would not come under this criterion. This decision of RBI would is considered as another step towards the path of strengthening up the financial system by infusing more liquidity.