Canara Bank has proposed insurance-linked education and agriculture loan products to prevent the recurring trend of delinquencies.
R.K. Dubey, Chairman and Managing Director of the bank, said this while speaking to newspersons at the end of the 109{+t}{+h} session of the State-Level Bankers’ Committee of which it is the convener.
CM SEEKS HELP
The proposal came up during discussions Dubey had with Chief Minister Oommen Chandy earlier on Tuesday morning.
The Chief Minister had sought the bankers’ help in sorting out the issues surrounding education loan disbursements in the State.
Dubey said he responded positively to the request but, in return, sought the State Government’s help with recoveries.
The service area and management quota stipulations did not apply anymore in the case of educational loans and banks were in a position to lend even more, he said.
But the bank is worried over the increasing trend for education loans to go into default even as the State has come to account for 13 to 14 per cent of all such loans disbursed in the country as a whole.
SECOND HIGHEST
Kerala accounted for the second highest portfolio of educational loans. But then, it also featured defaulted accounts (non-performing assets) to the extent of 10 per cent.
This was clearly unsustainable, Dubey said, but banks could not choose to stop lending to the sector merely because some accounts turned non-performing.
Branch managers were now being advised to talk out the issues and even arrive at one-time settlement packages for settling the loans.
Insurance-linked loan products have been thought of as a stop-gap arrangement till such time as the Centre’s own credit guarantee scheme for educational loans went operational.
Dubey said he would invite suitably aligned packages from not just his own insurance subsidiary but also from peers from elsewhere in the industry.
COST-EFFECTIVE
He had in mind a cost-effective product that did not add to the burden of the borrower. Instead, the premium amount would be debited into the loan account.
A similar product is envisioned for the agriculture loan portfolio as well. Essentially, these would help the bank save some precious money which would otherwise go down the drain.
Dubey also announced a Rs 50-lakh initiative from Canara Bank for victims of endosulfan in the plantations of Kasaragod district.
This would form part of the corporate social responsibility spending and came in response to a special request from the Chief Minister, Dubey said.
The bank was willing to reschedule any loans that the endosulfan victims might have contracted and could also consider a repayment holiday package.
vinson.kurian@thehindu.co.in