Bengaluru: Outgoing Reserve Bank of India Governor Raghuram Rajan on Wednesday said that education loans should be made flexible to the borrower.
“What a number of banks are finding is that some of the education loan borrowers are not paying back, default rate is picking up,” said Rajan at an interactive session organised by industry body Assocham.
To make the education loan repayment flexible, Rajan said a borrower should make use of the two available moratoria.
“You have two moratoria period that you may choose. May be immediately after your graduation or in a year or two. And that gives the flexibility,” said Rajan highlighting that some people do not get a job right after they graduate.
While the second moratorium was to structure the education loan repayment towards a borrower’s ability to pay, like tying the payment to his salary so that some fraction of the salary can go for the loan repayment.
However, Rajan also suggested that the penalties must not be extreme, saying if someone takes an education loan for not a big degree, it is better to write off the loan after some years if the borrower is still jobless.