An unsecured loan or personal loan is taken by individuals from a bank or a non-banking financial company (NBFC) to meet their personal needs which are provided on the basis of key criteria such as income level, credit and employment history, repayment capacity, etc
This year, the outstanding personal loan of banks were marked as Rs 19.33 lakh crore, which was just Rs 5.89 lakh crore in May 2010. This indicates a good growth in the personal loan business of banks- says the statistics by RBI.
The bank loans for the purchase of electronic items have increased. In June 2018, the consumer durables loan of banks was Rs 20,300 crore, which was Rs 8,138 crore in May 2010. Credit card loans have also increased: the outstanding credit card loan of June 30, 2018, was Rs 74,400 crore. It was Rs 19,579 crore in May 2010.
REASONS BEHIND THIS GROWTH
• These loans are easy to acquire
• Just 1 hour required to get these loans
• Facility to buy with credit cards and converting repayments into equal monthly installments
• Facility for online loan application
• Sometimes, banks offering low-interest rates leading to an increase in consumers.
While housing or vehicle loans are provided after considering the special needs of customers, personal loans are issued without considering any needs. Personal loans are different from other loans, as it is granted without any mortgage.
Banks are more concentrated on retail loans from 2010. They are now competing to provide loans by excluding earlier imposed terms and conditions for insecure loans like personal loans.
THE MAIN CONSUMERS OF PERSONAL LOANS
Mainly people who take personal loans belong to the age group 25-45. They rely on these loans for covering the money shortage in situations like marriage, education or other emergency situations. City dwellers are the main consumers of credit cards. 80% of credit card users are metro city inhabitants (more than 10 lakh). At the same time, this ratio was seen decreasing in the past years. In FY 2011-12, 99% of credit card users belonged to metro cities and by 2016-17, it decreased to 80%.
The growth in the personal loan industry has attracted more consumers towards it and financiers are expected to maintain their sharp focus on this segment.