The Reserve Bank of India (RBI) has recently introduced stricter regulations for individuals seeking personal loans and credit loans.
These changes may make it more challenging to obtain such loans compared to previous requirements.
Reports from credible sources suggest that the RBI has increased the stringency of background checks for banks providing unsecured retail and credit loans.
Understanding Unsecured Loans
An unsecured loan is a type of loan where no collateral is required to secure it with the bank.
Due to the absence of collateral, the interest rates on these loans are typically higher compared to other loan types.
The RBI has taken this step to address the issue of non-recovery of such loans.
Furthermore, the RBI has issued warnings to banks regarding this matter.
The RBI is also taking measures to regulate the unsecured loan portfolio to mitigate the risks of defaults.
Rapid Surge in Personal Loan Demand
Since the outbreak of the COVID-19 pandemic, there has been a significant increase in the demand for credit cards and personal loans among individuals.
The statistics reflect this upward trend. In 2022, the number of personal loan borrowers rose from 78 million to 99 million.
Similarly, the amount of loans taken through credit cards increased from INR 1.3 trillion to INR 1.7 trillion.
Furthermore, data from February 2022 reveals that the number of personal loan borrowers reached INR 33 trillion, rising to INR 40 trillion during that period.
Considering the potential risks of loan defaults, the RBI has urged banks to exercise caution when approving unsecured loans.
