Priority sectors have, over the years, become an omnibus carrying all types of passengers. Successive committees have widened the definition without bothering to fix uniform targets across banks.
Domestic educational loans do qualify to be included in the priority group. And happily no targets are fixed for such loans. The total amount lent as on March 2012 is Rs 52,004 crore. These loans have enabled thousands of young students to pursue higher studies. The number of borrowers is 26.47 lakh, of which about 55 per cent (15.48 lakh) are from rural and semi-urban areas.
Originally, education loans were extended for students from the middle-income groups to pursue higher studies. Taking advantage of the readily available schemes, parents from the richer sections also began availing such loans, especially for education abroad. There are now indications of defaults in repayment and that too after securing their plump jobs. Tracing defaulters in an alien country after a lapse of three to four years is difficult for bank mangers stationed in remote towns. The dollar-earning borrower, changes jobs like changing his shirt. There are also instances where the old parents, who stood as guarantors, are abandoned by the beneficiaries.
It is therefore desirable to confer the priority status only to domestic education loans and to treat foreign study loans as any other commercial loan. Incidentally, even in domestic education loans, there are problems of recovery.
When medicos refuse to service in rural areas
Since the implementation of the programme Health for All, more medical colleges have come. Banks have financed many of these colleges and have extended educational loans to students. It was expected that these medicos would spend at least two years in rural service. Unfortunately, most of them are looking for greener pastures. Atleast in one highly reputed medical college in the south, after completion of studies, the young doctors were insisting upon refunding the stipend obtained rather than serving the rural term!
Improving the efficiency of banks’ human capital
The banking sector in India has grown very large, functionally and geographically, during the last couple of decades. The size of bank personnel has also enlarged. The banking sector now trains the new recruits by out-sourcing. The Reserve Bank of India has appointed a Committee on Capacity Building in Banks and non-banks, under the chairmanship of Gopala-krishna, former Executive Director, Reserve Bank of India and currently Director, Centre for Advanced Financial Research and Learning.
The committee has made useful recommendations on improving the efficiency of the banking sector. “The recruitment process should not be sporadic or lumpy but ensure regular in-take so as to ensure growth in manpower in tandem with business needs. The recruitment process needs to be re-engineered to reduce the time lag between conduct of exams and issue of appointment letter.” Further it has argued for a transparent and comprehensive performance assessment exercise. The factors to be taken into consideration include clear Key Result Areas (KRA), a holistic performance evaluation framework which includes 360 degree feedback, ensuring adequate performance differentiation among employees and suitable reward and recognition. Creation of the position of Chief Learning Officer in banks is one of the other important recommendations made by the committee.
A minor omission is that no reference is made to the need for improving the skills of the lead district managers in the context of the accent on financial inclusion. When the lead bank scheme was introduced in 1970, there were less than 330 lead districts, whose number has gone beyond 630 at present. The recruitment, training and promotional prospects of this group of officers is grossly neglected in most of the banks. In order to make the Jan Dhan project a success, this cadre of managers has to be properly selected and trained.