Unsecured loans, though riskier, earn a higher interest for banks. While the private lender saw a tepid 1.8% growth in credit, unsecured loan segments such as personal loans, business loans and consumer durable loans (on an aggregate basis) contracted 28%. Private banks have a higher share of unsecured loans on their books, as compared to their state-owned peers. According to a 16 March report from India Ratings and Research, the performance of unsecured asset classes such as microfinance loans, unsecured business loans and consumer loans is worsening, given the borrowers’ depleted financial cushions and the nature of these loans. However, the wariness with regard to unsecured loans remains across banks.

Source: Mint May 04, 2021 17:13 UTC