Banks are encouraging student borrowers to apply for permanent account number (PAN) at the time of taking loans to prevent them from defaulting on the payment post completing higher education.

By asking for PAN, which is a 10-digit alphanumeric number allotted by the Income-Tax Department; banks will be able to track the defaulters for loan repayments.

Though obtaining a PAN is not mandatory for student borrowers, bankers feels that they should get their PAN card before completion of their course and inform the bank.

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.

So, if the borrower defaults, recovering the loan becomes easier.

"Whenever a student visits the branch for getting the next loan installment, we encourage him/her to obtain PAN. It is up to the student to get the PAN. As responsible citizens, they should obtain PAN," said a senior official of a public sector bank.

If a student borrower who has taken up a job after completion of his/her higher education course defaults on repaying the loan, then the PAN could come in help for a bank to cross-check his/her financial status from the income-tax returns or even know his/her whereabouts, the bank official added.

As on February 22, 2013, banks, mainly state-owned, had an education loan portfolio aggregating Rs 55,100 crore against Rs 50,000 crore as on February 24, 2012.