Educate youth on credit culture: RBI to banks, credit bureau

Stating that bad loans from education segment are very high, Reserve Bank deputy governor R Gandhi today asked credit information companies (CICs) and banks to 'counsel' the youth on good credit behaviour.
"The young borrowers are oblivious of consequences of non-repayment on their credit track record. Can CICs and banks look at 'catch them young' policy for credit counseling and developing a credit culture in them?" Gandhi said at a Cibil event here.
"The awareness campaigns need to be focused on the new generation, even before they enter into a credit relationship," Gandhi added.
He said the amount of non-performing assets of educational loans under Rs 4 lakh, which qualifies under the priority sector lending guidelines, was 7.54 per cent as of March 2014 as against the overall average of 4 per cent.

"Can CICs provide a periodic, non-chargeable credit report to the student loanees and make them aware of their own credit position?" Gandhi asked.
The comments come within a fortnight of Governor Raghuram Rajan describing education loans as a "complex issue" as the banks have to manage with the societal needs on one hand and the rising NPAs on the other.

The IIT and IIM-educated Rajan said even though State effectively subsidizes educational loans, one of the elite schools he attended has reported a problem on loan non-payment, and added the RBI is reviewing the scheme.
The need, Rajan had emphasized, was to track students better which is now possible using the Aadhar number and also have a good system of insurance where the not-so-successful students do not suffer.

Gandhi today expressed satisfaction at the coverage of CICs for retail borrowers, but pointed out the exclusion of the smaller businesses and corporates as a worry.
He, however, expressed dissatisfaction at the way CICs have been functioning, especially when it comes to sharing information and creating repositories.