The Red Cross blood bank has scrapped a policy that forced it to dump many donations of blood.

The policy, which was overturned mid-year, had forbidden the blood bank from using thousands of donations made to improve the donor's health rather than for purely altruistic reasons.

The rule stood even when the blood itself was of good quality, the donor wanted it used and there were shortages, the Australian Red Cross Blood Service has confirmed.

Blood donations are a recommended for haemochromatosis - a relatively common genetic disease which, untreated, can cause iron overload - and some other conditions.

Blood bank director Patrick Coghlan said the policy originated partly from doubts over the truthfulness of non-altruistic donors about risk factors.

The blood bank's position had been in line with other institutions overseas and also reflected a desire not to be seen as exploiting sick people, even when donating improved their health.