Personal loan interest rate likely to rise...!?

After the bank OF INDIA' target='_blank' title='reserve bank of india-Latest Updates, Photos, Videos are a click away, CLICK NOW'>reserve bank of india revises risk weight norms, lending rates on certain types of loans may be increased by 30-40 basis points, say business experts. After the bank OF INDIA' target='_blank' title='reserve bank of india-Latest Updates, Photos, Videos are a click away, CLICK NOW'>reserve bank of india revises risk weight norms, lending rates on certain types of loans may be increased by 30-40 basis points, say business experts. They also said that a rate hike is inevitable as the additional cost of credit operations will be imposed on borrowers following the RBI action. "Increase in risk will reduce returns on equity. Hence, banks will make some changes in interest rates. In personal loans, expect a change in lending rates in the range of 30-40 bps or more," bankers said.
Interest rates on unsecured loans tend to be higher as interest rates rise. The RBI has raised the repo rate by 250 basis points since last year to curb inflation. The key rate was last raised by 25 basis points to 6.5 percent in February. This is the highest level in five years. hdfc Bank's personal loan interest rates currently range from 10.50 percent to 25 percent per annum for terms of three months to 72 months, according to its website. Interest rates range from 10.50 percent to 16 percent, according to ICICI Bank's website. Among public sector lenders, the bank of india-Latest Updates, Photos, Videos are a click away, CLICK NOW'>state bank of india has an interest rate of 10.55 percent and the bank of Baroda has an interest rate of 12.40 percent to 17.45 percent.To curb the growing number of unsecured consumer loans, the central bank on november 16 increased the risk factor benchmarks for personal loans from banks and non-bank financial institutions by 25 percentage points. This means that banks and NBFCs have to allocate more capital while extending such loans. Consumer loans include credit cards and some personal and retail loans.


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Home loans, education loans, car loans, and loans against gold and gold jewelry are excluded from such assessments. RBI also increased the risk factor on loans to NBFCs. In recent times, there has been an increase in the provision of unsecured loans by banks. hdfc bank, the country's largest private sector bank, saw a 15.5 percent growth in its personal loan portfolio to Rs 1.78 lakh crore in the second quarter of FY24.

ICICI Bank's personal loans grew 40 percent to Rs 1.04 lakh crore in the July-September quarter, while credit card loans rose 29.5 percent to Rs 43,230 crore. mahindra BANK' target='_blank' title='kotak mahindra-Latest Updates, Photos, Videos are a click away, CLICK NOW'>kotak mahindra Bank's unsecured loan levels rose 50 percent to Rs 38,311 crore.

After the october Monetary Policy Committee meeting, RBI governor Shaktikanta Das flagged high growth in some components of consumer credit and warned against banks and NBFCs. Das said it is necessary to strengthen internal monitoring mechanisms, address risks, if any, and put in place appropriate safeguards in their own interest. "Stronger risk management and stronger underwriting standards are the need of the hour," he said.
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Sowmiya Sriram

24/11/2023 05:28 PM