Mumbai: Stating that bad loans from education segment are very high, Reserve Bank deputy governor R Gandhi on Tuesday 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 percent as of March 2014 as against the overall average of 4 percent.
"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.
"We have time and again issued instructions for submissions of timely, accurate and error-free data by credit information institutions. However, it is learnt that the data submitted to CICs by members is not regular or accurate.
"The credit information industry needs to develop much more here," Gandhi said, commenting on the decade-old industry's progress.
Meanwhile, he said the vehicle leasing companies, who take a credit risk on clients by leasing out vehicles, may be included in the list of sectors who can avail information from credit bureaus and contribute to their databases.
"At present, such companies are not being regulated by the RBI or any financial regulator. We would examine whether such leasing companies can be specified under the Credit Information Regulation of 2006 to obtain and provide credit info to CICs," he said.
Gandhi also said there is a case for making it mandatory for an NGO-MFIs incorporated as Section 25 companies to share their borrower data with CICs, just like the for-profit MFIs do.
