Banks prefer ‘safe’ customers for personal loans

Alarmed over the growing number of defaults, banks have tightened personal loans and prefer to extend them only to their own customers. Till recently, personal loans, along with credit cards, were a priority in the retail portfolio of the banks in view of the higher interest they earned.Many banks are not even considering a personal loan application from a non-customer. “As they are non-secured loans, there are higher delinquencies in the industry in general. We are giving preference to our own customers with good track record,” Mr R.S. Reddy Chairman, Andhra Bank, told. While the banks are tight lipped about the exact rate of delinquencies, according to experts, they range between 4 and 15 per cent. While the public sector banks are charging around 15 per cent interest on the personal loans, in some private banks and non-banking finance companies it ranges from 22 per cent to beyond 30 per cent. Interestingly, the existing customers are also given incentives for prompt repayment.