To prevent student borrowers from doing a vanishing act after completing higher education, banks are encouraging them to apply for permanent account number (PAN) at the time of taking loans.

By asking for PAN, which is a 10-digit alphanumeric number allotted by the Income-Tax Department, banks will be able to track down those who have defaulted on loan repayments.

Though obtaining a PAN is not mandatory for student borrowers, bankers feel they should get one before completion of their course and inform the bank.

This move comes in the backdrop of banks facing stress in the case of education loans of up to Rs 4 lakh.

As per the Indian Banks’ Association’s model loan scheme, banks can neither seek margin nor security for education loans up to Rs 4 lakh.

So, if the borrower defaults, recovering the loan becomes well-nigh impossible.

“Whenever a student visits the branch for getting the next loan instalment, we encourage him/her to obtain PAN. It is up to the student to get the PAN. As responsible citizens, they should obtain PAN,” said a senior official of a public sector bank.

If a student borrower who has taken up a job after completion of his/her higher education course defaults on repaying the loan, then the PAN could come in handy for a bank to cross-check his/her financial status from the income-tax returns or even know his/her whereabouts, he added.

As on February 22, 2013, banks, mainly state-owned, had an education loan portfolio aggregating Rs 55,100 crore (against Rs 50,000 crore as on February 24, 2012).

PAN is required to be quoted to facilitate linking of various documents relating to a taxpayer’s assessment, arrears, and so on.

The alphanumeric number helps the revenue authorities to easily retrieve and match information relating to investment, loans and other business activities of taxpayers.

> ramkumar.k@thehindu.co.in

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