Press Trust of India
New Delhi, Nov 6: Expressing concern over rising defaults in education loans, Reserve Bank Governor Raghuram Rajan Friday said they should be devised in a flexible manner, providing options like automtic moratorium if borrowers are “under a period of unemployment”. He also stressed on making know-your-customer (KYC) norms simpler. There are “lots of NPAs (bad loans) in the education sector. They have been rising in the last few years. It’s a matter of concern,” he said at the 6th Delhi Economics Conclave here.
Banks, he said, are increasingly asking for collateral for education loans. “If it is above 4 lakh they have right to ask for that collateral but it is an issue.” Education is one of the most important investments, he said, adding that more flexible loans can be created by using unique identification number or Aadhaar information. For example, “if you go under a period of unemployment you get an automatic moratorium. Doesn’t have to be negotiated with bank, it’s written up in your contract. “Similarly if you get really high-paying job you pay a little more. If you get low paying job or you go to public sector and work in public sector maybe you pay a little less. So, can we tailor such loans and how do we do it? There are a number of plans floating,” he said.
On KYC norms, he said it was important to make KYC simpler and easily accessible especially for the people who are moderately literate, who don’t carry lot of documents. “If they get access to KYC which can be triggered with biometric with Aadhaar. That will be really good. “If they want more sophisticated product then KYC becomes more sophisticated. For basic products, basic KYC. Now we have to integrate across all the financial regulators. The FSDC has a proposal which we are working on. We are nearly there. I think we should see that very soon,” he said. On financial literacy, he said there is a need to teach where there is lack of information and lack of knowledge on the essentials of managing finance. “I think we are on the verge of a paradigm shift of how we do financial inclusion. We have gone some way with enormous number of accounts which have been opened with the direct benefit transfer that you saw that is already underway.
“But there are enormous opportunities we can take advantage of, enormous profitable opportunities which will help both the consumer as well as the provider.”That technology we already have, the institutions are coming, the regulations will follow as appropriate. So what we really have to do now, implement, implement and implement,” he said. Rajan said that instead of mandate for financial inclusion, focus is on moving towards profitable business proposition. “Increasingly, we are trying to find bottom of the pyramid as profitable proposition so banks will go out. Institutions and other entities will go out to offer financial services without forced by mandate.
