4 Reasons Why Personal Loans By Banks Are Being Offered At Competitive Rates?

Subscribe to GoodReturns
For Quick Alerts
ALLOW NOTIFICATIONS  
For Daily Alerts

    Though, personal loans are expensive when compared to other set of loans such as car, gold or business low because of their unsecured nature, and banks and NBFC companies perceiving high risk in this asset class have kept the rate high, in the recent time frame the rates have rather turned competitive for a buyer. Here's why?

    4 Reasons Why Personal Loans By Banks Are Being Offered At Competitive Rates?

    1. More takers of personal loan: Demand for personal loans that are usually offered at an interest rate in the range of 10.75% -22% is surging ever since 2014. And as per the RBI's data, of the total loan book, retail loans or in particular the non-food credit is increased from just 18% in March 2014 to almost a quarter now.

    The rise in borrowing through the route has come in as this category of loan can be obtained in a hassle free way to meet any of the day to day shortfalls in finances just on the basis of income, creditworthiness and repayment capacity of the borrower and does not needs him or her to provide a collateral against the financed amount.

    2. Corporate lending has been on the decline: In the wake of Nirav Modi like scam and given the reeling pressure due to ballooning NPAs, banks have been directed to be extra cautious on lending to corporates. In fact, Allahabad Bank has been asked to cut back its exposure to risky assets.

    So, to offset the decline in corporate credit offtake, banks are offering retail or personal loans at competitive rates to not entirely loose on their credit portfolio.

    3. Banks perception of these set of loans being less risky: On a relative basis, the loans extended to the retail class have yielded lesser NPAs at just 2% of the gross advances while the NPAs from the industry and services sector has stood at 20% and 5% respectively.

    4. Digital transparency aids in better customer profile and credit worthiness realization and hence reduced credit risk: Artificial intelligence, data analytics, improved risk prediction model has also become the frontrunner of the banking industry and now to reduce the credit risk to the lowest possible, banks are ready to bear an extra cost here to reduce the risk assessment cost. To rule out credit risk, banks now aim to look upon all sources to extract customer's profile to reach a conclusion on their credibility from their shopping habit to various social media profiles.

    Goodreturns.in

    Read more about: loans loan personal loans
    Company Search
    Enter the first few characters of the company's name or the NSE symbol or BSE code and click 'Go'

    Find IFSC

    Get Latest News alerts from Goodreturns

    We use cookies to ensure that we give you the best experience on our website. This includes cookies from third party social media websites and ad networks. Such third party cookies may track your use on Goodreturns sites for better rendering. Our partners use cookies to ensure we show you advertising that is relevant to you. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on Goodreturns website. However, you can change your cookie settings at any time. Learn more