ADVANCES (OVERDRAFT LIMIT) AGAINST BANK TERM DEPOSITS
At the request of customers, Advances may be granted against term deposits lying to the credit of the borrowers in the books of the own bank Branches. Documents should invariably be executed in presence of the bank officer only. The documents should not be handed over to the borrower for obtaining the signatures of the other borrowers. Further, borrowers must be identified as per KYC norms and it is to be ensured that the person signing the documents is genuine one.
Branch Managers are advised to be more vigilant in sanctioning overdraft limit/ documentation and follow bank guidelines meticulously.
1. FOLLOWING ADVANCES MAY BE TREATED AS ADVANCES AGAINST BORROWER’S OWN DEPOSITS:
i) Advances made to a depositor against a deposit standing in his name singly or jointly with other depositor(s).
2. ADVANCE AGAINST DEPOSITS TO ILLITERATE PERSONS
In case of illiterate person, his thumb impression be taken in the presence of Branch head of the lending office as well as one independent witness i.e. account holder of the Bank.
3. COMPENSATION AWARDED BY COURT/TRIBUNAL
Branches are advised that whenever a Fixed Deposit is made on account of compensation awarded by some Court/ Tribunal, no loan or advance should be granted on the strength of said Fixed Deposit without the express permission of the Court/Tribunal, which ordered the deposit.
4. TERMS & CONDITIONS FOR ADVANCES AGAINST BORROWER’S OWN DEPOSITS:
(i) MARGIN – Currenty 70% As Applicable at the time of Sanction
Branches to ensure the adequacy of margin on case-to-case basis so that at no time the amount outstanding in the loan account against the deposits along with the unrecovered interest accrued/debited exceeds the value of security. Further, the tax deductible at source, wherever applicable, should also be taken into account while allowing such advances.
Further, in case of term deposits under reinvestment plan, security for advances made there against is not merely the amount of original deposit but also the amount of interest accrued upto the last/preceding quarter. In such cases the interest accrued may be determined at quarterly compounding basis till the preceding quarter on the date of granting such advances and may be treated as deposit.