To prevent default on payment of loans, banks are encouraging student borrowers to apply for permanent account number (PAN) at the time of availing loans.
However, obtaining a PAN is not compulsory for student borrowers.
According to banks, by asking PAN—allotted by the Income-Tax Department—they will be able to track the defaulters for loan repayments.
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. And this move is initiated in the backdrop of banks facing stress in the case of education loans of up to Rs 4 lakh.
Hence, if the borrower defaults, recovering the loan becomes easier.