Personal Loan Growth in India

The personal loan is growing aggressively in India. The personal loan market has become competitive with the arrival of foreign banks and non banking finance companies. Some of the major banks that are making big strides in the personal loan segment are ICICI Bank, HDFC Bank, Standard Chartered Bank, Centurion Bank of Punjab, and Citibank. Among the non banking finance companies, are firms like GE, Fullerton India and DBS Cholamandalam that are also marketing personal loans. The level of delinquency has increased by 10-20 percent due to growth. It has led the banks to stiffen their due diligence of marketing agents and review of recovery strategies. As per the data published by RBI, the growth of personal loans is 23 percent year-on-year.

The banks and NBFCs are focussing on the unsecured loans products because this segment promises high business that covers for any defaults. The variation in the interest rate on various personal loans ranges from 14 percent to 30 per cent. In order to enhance the credits off take, the State Bank of India ( SBI) has come up with a major initiatives by lowering the income limit of borrowers from Rs 6,000 per month to Rs 3,000 per month. It has resulted in the lowering of the interest rates across the board by 0.25 to 0.50 per cent. This move was intended to meet the demand from lower as well as middle income groups for lowering the minimum net monthly income (NMI) predetermined for taking a personal loan.

The SBI was earlier giving the personal loans to individuals up to Rs 10 lakh for various purposes such as travelling, marriage, medical treatment, and other purposes, in case they had Net monthly income of Rs 6,000 or above. All government employees, PSUs, profit-making public/private limited companies and institutions are eligible under the modified scheme called as festival loan scheme for public. As per the scheme, the minimum amount of loan is Rs 5,000 and maximum amount is four times the NMI or Rs 50,000.

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