Personal Loan business is growing aggressively

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Personal Loan business is growing aggressively
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• Market for personal loan in India is growing and
  has become competitive with the coming of foreign
  banks and non banking finance companies entering
  this space. Banks such as ICICI Bank, HDFC Bank,
  Citibank, Standard Chartered Bank, Centurion Bank
  of Punjab and non banking finance companies such
  as GE, DBS Cholamandalam, and Fullerton India
  among others are aggressively marketing personal
  loans.

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• With the growth the level of delinquency has gone
  up by 10-20 per cent. This rise in the
  delinquency has led the banks to tighten their
  due diligence of marketing agents and also
  reviewing recovery strategies.
• The RBI data shows the growth of 23 percent in
  the personal loan year-on-year to Rs 87,944 crore
  as on May 25, 2007.

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• Banks and NBFCs are working on unsecured loans
  products as the yield in this business is high
  which covers for any defaults. There is a
  variation in the interest rate on personal loans
  from 14 percent to 30 per cent.
• Neeraj Swaroop, CEO, Standard Chartered India
  said, We see growth in the personal loans
  business. In the unsecured space, we have better
  ability and hence, we are aggressively pursuing
  the personal loans business.

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• But there are some banks like IndusInd Bank, a
  private sector bank who are opting out of the
  personal loan business. Bhaskar Ghose, managing
  director, InduInd Bank said, The yield in
  unsecured loans is higher. However, whenever
  there is an economic downturn or the customer
  faces an economic crisis, individuals tend to
  default on these loans. Hence, on a standalone
  basis we have stopped giving personal loans.

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• IndusInd Bank will give personal loans only to
  customers with corporate salary accounts as the
  number of defaulters is rising. Ghose said, This
  is the safest way to do the business as the bank
  deducts the installment from the salary account
  and if the employee decides to quit the
  organization, then the amount is deducted from
  the final settlement.

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According to banks loan data, 58 per cent
accounts for vehicle finance loans, 13 per cent
account for other retail loans and balance is
wholesale (corporate) loans.
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