Banks make beeline for personal loans - Views on News from Equitymaster

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Banks make beeline for personal loans

Jul 5, 2000

A Personal Loan is an all-purpose loan, which you can use for whatever you want, whereever you want, however you want – no questions asked. The present spurt in personal loans is evident from the fact that the banking major – State Bank of India has set aside Rs 1 bn, the amount being equal to the amount for housing loan allocation.

Banks are now days willing to finance any conceivable expense. Having financed cars and homes for several years, these days business savvy moneylenders are beginning to realise the value of financing even small domestic needs of the individuals.

Some of the major players offering personal loan are HDFC Bank, ICICI Bank, Citibank, HSBC Countrywide, ANZ Grindlays Bank, American Express, SBI and Standard Chartered Bank with ABN AMRO being the latest entrant in the arena. And the most important factor is one does not need to maintain an account with the bank, although a few nationalised banks insist on it.

While the nationalised banks offer only consumer loans for specific product, foreign banks and multinational finance companies also give clean cash.

To reduce the paperwork and processing time these banks and NBFCs have very minimal document requirements as compared to housing and auto loans. For instance most banks demand:

  • Proof of residence and identity
  • Last few months’ salary slips and bank statement.

Most of the banks offer personal loans in the range of Rs 20,000 to Rs 1,000,000 and the interest rate varies in the range of 19% to 23%

Banks Years Loan
Amount (Rs)
fee (%)
charges (%)
rate (%)
Citibank 1 to 4 40,000 - 10,00,000 2 2 21
HSBC 1 to 4 50,000 - 800,000 2 2 20
HDFC Bank 1 to 4 25,000 - 300,000 2 2 21
ICICI Bank 1 to 3 20,000 – 300,000 2 2 21
StanChart 1 to 3 40,000 – 500,000 2 3 23

The concept of personal loans is fast catching up in the Indian psyche. The number of players in this arena has increased dramatically over the last few months. Now most of the banks (foreign as well national) and NBFCs are adding personal loans to their product portfolio. This is a win-win situation for both consumers and the financial institutions. It’s also a good thing for the economy as banks keep the money in the system rotating at all times.

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