Raising concerns over the increasing level of non-performing assets (NPAs) in the education loan portfolio, Reserve Bank of India (RBI) governor Raghuram Rajan on Friday underlined the need to create flexible repayment structure for these loans.
Addressing the Delhi Economics Conclave, Rajan said that banks are looking at the possibility of providing the options of different and flexible repayment structure to students - who have taken loans - based on their employment and salary patterns. Rajan added that the Aadhar and other information would help banks to tailor such flexible repayment structure.
Underlining that education loan forms one of the most important sources of investment, Rajan said that contracts should be made in a manner to automatically provide a moratorium to students who fail to get jobs after they earn their degrees.
“Similarly, if you get a really high paying job, you pay a little more, if you get really low paying job or you go to the public sector and you work in the public sector, you pay a little less, so can we tailor such loans and how do we do it,” Rajan said, addressing the conclave, adding that “a whole lot of” information including from income tax authorities would be critical for this. Information collection and aggregation would be critical and Adhar would play an important role in this endeavour.
The rising NPA level in the education sector is source of concern and banks are increasingly asking for collaterals especially for loans above Rs 4 lakh, he said. “They have the right to ask for it but it is an issue,” he said.
The total outstanding in education loan as on March 2015 stood at Rs 61,976 crore against Rs 58,256 crore in March 2014. Currently, banks, on an average, charge 12.88% for an education loan. The finance ministry meanwhile has asked banks to target a 15% growth in this segment in the current financial year.