Due to rise in inflation and slowdown in the economy there was rise in the number of loan defaulters. Because of this alarming situation the banks tightened personal loans and have decided to give them only to their own customers.
Before this situation personal loans, along with the credit cards used to be the priority in the retail portfolio of the banks as they earned higher interest. But now many of the banks have even stopped accepting a personal loan application from a non-customer.
Mr R.S. Reddy Chairman, Andhra Bank, informed Business Line, “As they are non-secured loans, there are higher delinquencies in the industry in general. We are giving preference to our own customers with good track record”.
Although banks are not disclosing the exact rate of delinquencies, but according to experts, they range is between 4 and 15 per cent.
According to a source earlier ICICI Bank, was the aggressive lender of the personal loan but it has even reduced the marketing staff engaged for selling personal loans products.
He said, “Unlike earlier, personal loans are being offered on the basis of in-house analysis of a customer’s account”. The bank is making use of pop-up messages on its ATMs to offer personal loans for ‘safe’ customers.
When contacted, the official spokesperson of the bank refused to reveal the exact percentage of defaults.
As per information provided by HSBC, the “unsafe” credit collection environment is the responsible for fear on personal loans.
Indeed, a couple of foreign banks have almost closed this segment though they are denying this on record.
Although the interest rates are moving downward but banks are not extending this benefit to the personal loan customers, mainly because of the fear of future defaults, informed experts.
However the public sector banks are charging around 15 per cent interest on the personal loans, but some of the private banks and non-banking finance companies are charging from 22 per cent to beyond 30 per cent.
Moreover, the existing customers are also being offered incentives on prompt repayment.
Ms Leena, who took a loan of Rs 1.3 lakh, told, “It was a pleasant surprise to me when I received a cheque for Rs 2,400 with a top-up offer from Axis Bank for prompt repayment of EMIs for last one year”.