NEW DELHI, Nov 18: The Reserve Bank of India has lifted the requirement on banks to transfer shares in their names if the shares held as security by them are in a dematerialised form.

The RBI has advised commercial banks to avail of the facility of giving loans against dematerialised shares in its circular dated November 8. As per the current guidelines of RBI, whenever the limit of advances granted to a borrower against the security of shares/debentures exceeds Rs 10 lakh, the banks have to ensure that the shares/debentures are transferred in their name and that the bank has exclusive and unconditional voting rights.

"The Securities and Exchang e Board of India has also amended the Sebi (depositories & participants) Regulations, 1996, to facilitate the pledge of demat shares," the circular states.

In the dematerialised form, the securities pledged by the borrower get blocked in favour of the lending bank. In case of default by the borrower, the bank may invoke the pledge, subject to the provisions of the pledge document and on such invocation, the depository will register the name of the bank as the beneficial owner of such securities.

Banks like Bank of India and Global Trust have already realised the advantage of providing loans against shares in a dematerialised form, and have announced a lower interest charge for loans against such shares.

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