Every bank, especially the new generation private sector banks prefer lending to retail sector (that means individuals like you and I) as compared to lending to corporate sector. Personal Loans (PL) are the core of Retail Loans.
The key to Corporate lending is the future earnings while for the Personal Loans revolve around the Credit History. Personal Loans are for Short Term, shorter the better. These are mainly unsecured loans and the rate of interest here is higher than that of any other type of loan.
There has been an over 100% growth in the country’s Personal Loans portfolio in the last 3 years. Currently this book is over Rs. 3.5 lac crore (banks and NBFCs put together with private sector banks leading). Ticket size of these loans average Rs. 5 lacs.
Personal Loans are driven by technology. Data Analytics is the key here:
- Use of inhouse data have given an important potential client list to the bank
- Use of credit bureau data has added immensely to the credit decision process of banks
- Use of social networking sites for input on the applicant / borrower
- Technology driven processes have reduced approval time
- Use of data analytics has helped recovery of the dues on ‘real time’ basis
Benefits of Personal Loans to lenders:
- Quick disbursals and hence, fast building up of the loan book of the bank
- Higher spread
- Average NPA levels are less than 3% with private banks’ share being within 1%
- These are mainly given to the salaried employees