Banks will discuss the matter among themselves and give their recommendations to the banking regulator, said two people familiar with the development.
“The RBI has forwarded us a suggestion that it received on this matter and sought our views. We are holding industry-wide discussions, including with private sector banks, and will submit our recommendations,” said a senior public sector bank executive, who did not wish to be identified.
Education costs in India are increasing an estimated 10-12% annually, outpacing household income growth, according to recent industry reports.
Another bank executive said that any such product will require regulatory dispensation. “A product of this kind, carrying a preferential interest rate tied to a specific end-use, will need some new regulations, and that only the RBI can prescribe. We will highlight those challenges,” he said, adding that currently banks do not offer any product with preferential rates tied to a specific purpose.
Queries emailed to the RBI did not elicit a response till press time.
“The only instrument which has some similar features is the Sukanya Samriddhi Yojana, but that’s a government-driven scheme,” the executive added.
Banks hold discussions across the industry, including with PSBs
Under the scheme, the government offers 8.2% interest per annum and deposits are capped at ₹1,50,000 annually. Announced in 2015, the scheme aims to encourage families to plan early for their daughters’ education and well-being. The deposits under the scheme can be made for a period of up to 15 years from the account opening date.
Earlier this year, a Crisil Ratings report said that increasing enrolments and fee hikes across segments will help educational institutions record an 11-13% jump in total income during the current and next financial years.
“This fiscal will mark the sector’s fifth straight year of double-digit growth, majorly driven by higher spending on education by households as incomes improve,” the report said, adding that K-12 (kindergarten to 12th grade), accounting for a third of the sector’s revenue, is expected to expand at a steady rate of 9-10%, supported by increasing urbanisation and affordability, along with annual fee revisions at private schools.