Banks Ask Borrowers to Repay Loans

Bangalore: According to the recent RBI Financial Stability Report, the banks are facing a huge risk as their non performing assets (NPAs) i.e. outstanding personal loans, without housing, consumer durables, credit cards etc. alone stood for 12,817 crore ( 128.17 billion) at the end of December 2011. The stats figured out that the year-on-year growth of NPAs of these highest risk facing banks is 30.5 percent, which is higher than the credit growth at 19.2 percent.

Due to this condition banks are asking borrowers to cover their personal loans by buying insurance policies. “Cover with personal loans and overdraft facilities have gained traction in recent times. Both public and private sector banks are aggressively pushing these products to retail customers,” said senior State Bank of India (SBI) official, as quoted by Business Standard.

This term of bad loan recovery have pulled down the profit margins of the state owned banks, while the case is upside down in case of the private sector banks. The private banks earned higher profits in the Q3 ended December 31, 2011.