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Posted On: 4 January 2009 11:51 am
Updated On: 12 November 2020 02:09 pm

Banks get tough on granting loans

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Banks are to adhere to strict guidelines in disbursing personal loans due to forecasts that the global recession would worsen this year. Some banks have decided not to grant loans to residents who have arrived here afresh. An applicant needs to be based here for at least six months to be eligible to borrow from a bank. During the days of high surpluses not too long ago, banks in the country liberalised their lending policies to beat the fierce competition so much that salary transfer was the only criterion for a borrower to access a loan. Residents were offered huge loans by some banks even after their first salary transfer. A number of banking entities are now also mulling raising the minimum salary limit for loan-seekers to ascertain that they are able to service the debt without any difficulty. A potential borrower’s financial situation may also be scrutinised to make sure he has the capability to repay a loan. Banking industry sources point out that it is not easier any more for residents to seek bank loans as, among other things, the earlier system of maintaining lists of ‘financially sound’ companies is being resorted to again by some lenders. Some banks earlier gave away loans only to individuals who were employees of companies which figured on their lists of ‘reputed and stable organisations’. Banks may also stop topping off personal loans which they gladly did earlier, and turn down an applicant’s request for a loan if he has defaulted in repaying debt in the past. Nearly all banks topped off personal loans at the request of a borrower at least once a year. Topping-off refers to a bank rescheduling a loan after equal monthly installments (EMIs) have been paid regularly by a borrower over a period of time. Borrowers applying for a bank loan might also be asked to specify which other banks, if any, they are dealing with and produce proof that they do not figure in their lists of defaulters. All banks have lists of ‘proven defaulters’.