Loan spendthrifts beware!

BANGALORE: The Indian salaried class may be willing to splurge on borrowed funds. But banks in public sector are not ready to bet on this consumerism.
Most nationalised banks are going slow on consumer loans and even personal loans have been put under hot list.
Sources in nationalised banks say they have been asked to go slow on personal loans or disburse with utmost caution.
"NPAs (non-performing assets) are on the rise in personal loans. We will give a personal loan only when a borrower meets long list of conditions," says a source at Syndicate Bank.
Most banks have begun to insist that a borrower should maintain his salary account with the bank if he needs a personal loan.
The more conservative lenders even expect the employers to take up loan recovery responsibility.
The story in the private sector, however, is different. With personal loans still carrying an interest rate of 15-18 per cent, most private banks consider a money spinner.
While ICICI Bank, Citibank, Kotak Bank and HDFC Bank have already built up a good base, even the smaller private banks are aggressively looking at it.
IDBI Bank, which had till date focused largely on home loan for its retail lending, has entered the personal loan segment.
Having built an asset base of Rs 100 crore in the last four months, the bank is hoping to grow it by Rs 300 crore in the next one year.
"We have 50,000 home loan customers and nearly 10 lakh deposit account holders with us. There is a huge potential for cross selling," says Prashant Joshi, head, retail assets, IDBI Bank.
According to Srikanth Velamkanni, vice-president, Fractal Analytics, data mining or understanding the creditworthiness of a customer is very crucial while lending an unsecured loan and adds that almost every private sector bank takes up extensive credit appraisal of its prospective borrowers.
That is one of the reasons why private and foreign banks still aggressively lend personal loans despite the risk factor. Public sector banks, obviously are yet to understand their customers thoroughly.