RBI working on rules to strengthen financial customer protection: Rajan

Also expresses concerns over rising defaults in education loans and suggests changes

Reserve Bank of India (RBI) Governor Raghuram Rajan said on Friday the central bank was working on strengthening the protection to financial customers from scams, Ponzi schemes and the like. Such rules could be implemented by the end of the financial year, he said.

“We have in the works rules on consumer protection which we are looking at, along with the banks. These may be rolled out by the end of the year,” Rajan said in his address at the Delhi Economics Conclave.

The RBI governor was speaking at one of the plenary sessions of the conclave, the topic of which was Financial Inclusion and DBT – The Uncovered Territory.

Expressing concerns over rising defaults in education loans, Rajan said these should be made in a flexible manner, providing options like automatic moratorium if borrowers come “under a period of unemployment”.

There are “lots of NPAs (non-performing assets) in the education sector. They have been rising in the last few years. It is a matter of concern,” he said.

Banks are increasingly asking for collateral for education loans. “If the loan is of more than Rs 4 lakh, they have the right to ask for collateral. But it is an issue.” Flexible loans should be created by using unique identification number or Aadhaar information. “For example, if you go under a period of unemployment, you get an automatic moratorium. Doesn’t have to be negotiated with bank, it’s written up in your contract. Similarly if you get a really high-paying job, you pay a little more. If you get a low-paying job or you go to public sector and work in public sector, maybe you pay a little less,” he added.

He also stressed on making know-your-customer norms simpler. Separately, speaking on the sidelines of the event, Minister of State for Finance Jayant Sinha said Moody’s Analytics’ criticism of the government, was baseless. Such comments were made when opponents become “restless” over the government’s success. “Moody’s comment was totally baseless and there is no depth in its argument,” Sinha told reporters.

“As we become successful and do good work for people of the country, our opponents will become restless. When they become restless, such kinds of comments will come.”

On October 30, a report by Moody’s Analytics publication Dismal Scientist had cautioned Prime Minister Narendra Modi to rein in the far-right elements within his party or risk losing credibility. The note was titled India Outlook: Searching for Potential.

Earlier this week, the government had lashed out at a section of the media for “irresponsible and distorted reporting” of the report and dismissed the report as the “personal opinion of a junior associate economist”. A day later, a spokesperson for Moody’s Analytics said the report was the view of Moody’s Analytics.

"As we become successful and do good work for people of the country, our opponents will become restless. When they become restless, such kinds of comments will come,” Sinha said on Friday.

Answering queries on Bihar election, Sinha said people of the state have cast vote for development and the BJP. Most exit polls at the conclusion of voting in the Bihar Assembly elections yesterday predicted that the Nitish Kumar-led Grand Alliance will win while some forecast victory for the BJP-led group.