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Large Banks continue to be bullish on personal loans

September 26, 2023

Large Banks continue to be bullish on personal loans
Large banks continue to be upbeat on growing their unsecured retail personal loan books at a time when both analysts and the Reserve Bank of India (RBI) have sounded caution about their aggressive growth in the segment. Senior bankers believe that their strong underwriting norms and proactive actions gives them confidence of being able to contain the non-performing assets in this category.

Ashwini Tewari, MD, State Bank of India (SBI) said earlier this month a significant part of the bank’s unsecured retail loan book consists of salary earning individuals, where the delinquency rate and non-repayment risk is much lower. 
 
The share of retail personal loan book in overall advances increased to 43% as of June 30 from 42% a year ago. The bank’s personal loan segment gross non-performing asset (GNPA) stood at ₹8,497 crore as of June end. In percentage terms, its GNPA ratio stood at 0.71% as of June 30, lower than 0.83% a year ago.
 
“We are fairly safe (in growing unsecured book). Of course, as this grows further, we have to do better job at underwriting, which we are doing,” he said, adding that a key element of growing personal loan book is also building capabilities to collect repayment of small-ticket loans digitally.
 
SBI is “talking” to two fintechs and has started few pilots in the Northern region to collect loans digitally and monitoring repayments. One of the fintech’s model is conciliation, wherein they talk to customers in their regional languages and explain the repercussions if repayment is missed. Another fintech is studying the propensity of default by a customer, wherein if there are any past non-repayment behavioral trend, the fintech measures it beforehand and alerts the lender to follow up with the concerned customer at an early stage.
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