Banks going for strict norms for personal loans to keep borrowers at bay

When you enquire from the banks whether they are going slow on personal loans you will get answer as No. But there are some subjective evidences which points towards it. The banks have intentionally stopped promoting it as a product and laying more stress on home loan and educational loan melas.

Then what is the reason for this becoming an unpopular product? There are a number of reasons for not being too aggressive about this product now. Bankers, not wanting to get his name disclosed said, “The default rates are on the rise; we have to make higher provisioning to cover the risk weights; and this is making the product more costly leading to higher default. The monitoring mechanism is not easy. Borrowers prefer to default on personal loans since there is no collateral that can be seized. It is a vicious cycle.”

Banks directly are not rejecting the loan applicants but have fixed more stringent norms to keep such borrowers at bay. Selective private banks in the South when asked they said they have had revised the parameters to make it a ‘well-structured’ product. One of such new norm says - not to lend loans to people who have held a job for less than 3 years.

Earlier banks used to give personal loans if you had been employed in a place for at least one year time period but now these straightaway rule are going to set as rolling stones for those who hop for jobs every year.

An official maintain that “We found every 10th such account giving us problems. This clause disqualifies those that hop jobs more frequently”.

Banks are stressing more on investing in stock market due to which they have started refusing personal loans, for purchase of unapproved site and to those that do not have a monthly salary.

Even the loan amount approved has also come down. The approvals do not exceed five times the gross annual income as compared to seven times the gross income sanctioned earlier.

Though, some banks are stepping ahead of sanctioning loans for conducting a daughter’s marriage or some other personal function at home.

The official referring to the marriage advance said, “Personal loan is relationship banking. And such advances have not gone bad”. It seems you have to play the sentiment card to get a personal loan now!