It may be noted that personal loans are unsecured loans and given without any collaterals but lenders get higher margins
New Delhi: The market for personal loans is growing quickly. Personal loans have hit a record Rs 3.5 lakh crore during 2018-19, says an Economic Times report, citing data obtained from top credit bureaus. It may be noted that personal loans (PLs) are unsecured loans and given without any collaterals but lenders get higher margins.
Ramadasu Bandaru, AGM, CARE Ratings, told the publication: “Personal Loan books have never grown to levels as it is now… It’s kind of a record book-size currently. Lenders do not prefer to give loans to corporates anymore. Every lender is trying to grow their retail books aggressively now – and this is where PLs come handy.”
It is worth noting that personal loans come with high-interest rates. Lenders charge between 12 per cent and 24 per cent per annum from borrowers of these unsecured loans. Some non-banking financial companies (NBFCs) and fintech firms charge up to 26 per cent while lending fund to borrowers with low credit scores.
The financial daily quoted Ambuj Chandna, who heads the consumer assets vertical of Kotak Mahindra Bank, as saying, “These are typically consumption-driven borrowings… People take personal loans for anything – right from marriage to acquiring an asset or redoing their houses.”
As per the report, state-controlled banks and NBFCs are exploring all possibilities to enlarge the segment by reaching out out to smaller towns and even rural areas. As of September 2018, private sector lenders such as Kotak, HDFC and ICICI jointly hold close to Rs 1.45 lakh crore worth of personal loans, while state-run banks and NBFCs cater a PL pool of over Rs 2 lakh crore.
“A large portion of our book comprises loans given to our existing customers. It’s easy for us to give loans to existing customers as we have enough data on their banking habits,” Chandna told the publication.