41808More than 80 flights of AI express cancelled

In this pandemic emergency funds is on everybody’s minds. But it might not be easy for everybody to quickly create an emergency funds while meeting the normal family expenditure. To help the common people to meet sudden needs of funds at this critical hour, Reserve Bank of India created an on-tap liquidity window of Rs 50,000 crore that the banks are now using to offer personal loans at attractive interest rates.

This is an unsecured loan up to Rs 5 lakh at a much lower rate of interest of around 8.6% per year.

Personal loan rates
All PSU and private banks offer personal loan to its customers during the normal course of business. Generally salaried, self-employed or professionals get this benefit. Nowadays banks usually sanction personal loan within an hour or two if other requirements are in place.

But interest rates on personal loans are on the higher side. These loans are usually have a repayment window between 60 months and 72 months, depending upon the loan amount.

Different banks offer different interest rates. For loans up to Rs 20 lakh SBI offers interest rates between 9.6% and 13.85%. Bank of Baroda offers interest rates between 10% and 15.6% up to a loan of Rs 10 lakh.

Up to Rs 10 lakh, PNB offers rates between 8.95% and 14.5%. On the other hand, Union Bank offers 8.9% to 13% for a loan up to Rs 15 lakh.

Private players like HDFC Bank offers between 10.5% and 21% for a loan amount up to Rs 20 lakh. ICICI Bank gives loan with interest rate between 10.5% and 19% for loan up to Rs 25 lakh.

For loan amounts between Rs 50,000 to Rs. 15 lakh AXIS bank offers the interest rate between 10.5% and 21%.

Banks like IndusInd Bank and Kotak Mahindra Bank offer interest rates between 11% to 21% for any loan between Rs 50,000 and Rs. 15 lakh.

Bajaj Finserv offers 13% to 30% interest rate for a loan amount up to Rs 25 lakh.

Pandemic loans
On May 30, the chairman of State Bank of India (SBI) and Indian Banking Association (IBA) issued a joint press statement saying all PSU banks will give a Covid treatment-related personal loan from Rs 25,000 to Rs 5 lakh.

SBI will charge 8.5% interest on these loans. All banks are free to choose their own interest rates, said the press statement.

The loan must be repaid within 5 years from the date of disbursal.

Public sector banks will provide “unsecured personal loans to individuals from Rs 25,000 to Rs 5 lakh for salaried, non-salaried and pensioners for meeting the emergency COVID treatment”, said a joint statement by SBI and IBA.

Self-employed professionals and those with their own business can also get these loans.

Documentation
For applying for a personal loan banks have changed the documentation pattern during the pandemic.

Usual salary slip and form 16 (for high value loan) is required along with the appointment letter of the person from the employer.

Besides, some banks are asking for a work from home (WFH) certificate issued by the employer for a personal loan. Also, the KYC is a definite requirement with personal loan being an unsecured loan.

It takes maximum one day to process a personal loan. The amount is credited to the borrower’s account either on the same day or the next day.

The Indian market
According to IBA, as of September 2020, the personal loan book of the banking industry stood at Rs 5,07,684 crore, having grown by only 0.57 per cent over March 2020 due to Covid-19 disruptions.

Within the overall industry book, small ticket personal loan (up to Rs 50,000) market, as of September 2020, stood at Rs 12,200 crore, witnessed a growth of 77% year-on-year.

In FY18 and FY19, the loan book grew by around 40% annually, which dropped to a growth of only 26.5% in FY20.

Experts feel that in the next 4 years the personal loan market will grow by a pace of 12%, if not more.