Banks poke student loan defaulters on social media, embarrass employers

Banks are getting adept at using social media to embarrass students who have defaulted on repaying education loans. With bad loans rising, some are using modern tools such as Facebook and Twitter to hunt down defaulters. Their ingenuity is understandable because defaults on student loans have soared 70-80% this fiscal due to a weak job market, well over twice the last fiscal’s rate.

Most of these defaults have been on loans of up to Rs4 lakh where no collateral is required to be pledged. And getting ‘caught’ online could lead to severe embarrassment for defaulters as Rahul Singh found out recently. Singh was flabbergasted when his boss asked him to repay the loan as soon as possible to a public sector bank. Using Facebook, the bank tracked him down and his employment details. And guess what, Rahul’s office headquarters and a branch of the bank happened to be in the same building.

“Searches online have been very useful. You can find out the name of the employer and exert pressure through the employer on the defaulter,” said a senior bank official.

With its over 6.27 crore Facebook users, India is third behind the US and Brazil. Half of them are in the 18-24 age-group, while another 25% fall in the 25-34 age-group.

“We use social media to interact with students, including reminding them about their overdue loan payments,” said Pravin K Bansal, general manager of retail banking at Union Bank of India. As the government liberalises rules and encourages higher student loan disbursals, recovery of educational loans, is a priority at banks. For, increasing non-performing assets, including both student loans and other loans, put pressure on their profitability and growth.

“Social media is the first step to trace the defaulter. But after that, the recovery process can come to a halt if the defaulter is unemployed or not in the position to repay,” said Ram Sangapure, general manager of retail at Central Bank of India.