Personal Loan FAQs

What is a personal loan?

A personal loan is a type of loan which can be used for your personal use like for a holiday, wedding, etc. Personal loan is comparatively easy to obtain when you are in urgent need. An important point to note is that personal loan comes at a higher interest rate as compared to other loans. Thus, you should only go for this, if you can repay it. You can take a personal loan for up to five years. As compared to other loans, the personal loan requires lesser paperwork. The amount of personal loan depends on the income of the person.

Am I eligible for a personal loan?

Any individual who has a regular source of income can take a personal loan; you can be a working professional, salaried person or a business owner.

What is the minimum amount of personal loan that I can take?

Yes, there is a minimum amount. Although, the loan amount is different for different financial institutions. Most of the money lenders have set the minimum loan amount to be 30,000.

What is the tenure of a personal loan?

The tenure for loan year ranges from 1 – 5 years. Few financial institutions also offer seven years loan tenure.

Can I have a co-applicnat for personal loan ?

It’s true that you can apply along with your spouse. Having a co-applicant increases your income bracket, thus making you eligible for a higher loan amount. But, at the same time, you should remember that a poor credit history of the co-applicant might adversely affect your loan application.

What is the basis for calculation of maximum loan amount?

In case of salaried people, the banks or the financial institution, from where the person is taking the loan, makes sure that the EMI of the loan should be 30% -40% of the total take home salary. If the borrower is already availing some other loan like home loan, car loan, etc. then, these factors are also taken into consideration while calculating the personal loan amount. In case of self-employed people, the profit earned in the most recent P/L Statement is considered. Banks also considers other liabilities of the applicant before calculating the EMI and loan amount.

What are the documents required for personal loan application?

Although, the documentation process is different for different financial institutions. But, there are a few documents which are commonly required by almost every financial institution and banks.

Here is the list of documents for personal loan that you must have while applying :

  • Income proof like salary slip for working professionals, ITR is required in case of self-employed individuals. Banks may ask for the most recent Profit and Loss Statement as well for business owners and self-employed individuals.
  • Address Proof
  • Identity Proof like Adhaar card, Pan card, passport, etc.

Is there any pre-payment charges in case the person wants to pre-pay the personal loan?

There are times when a person might want to pay off the loan before the loan tenure period, in that case, the banks or the financial institutions charge additional ad fees which are known as pre-payment or foreclosure. This amount usually ranges between 1%-2% of the principal outstanding amount. Again, some for some banks the foreclosure amount might be higher.

For any help regarding personal loan, Loanyantra is completely on your support. Get proper guidance and faster disbursal at a lower interest rate and also get cash back offers. All you need to do is just give a missed call to 040-71011991. Get a call back from a dedicated relationship manager.



Home Improvement Loan. Do you know this?

Home Improvement Loan – an easy way to renovate your home

The growing popularity of home loan is very well known, the fact that banks are now laced with customer-friendly policies has made it very easy for people to buy their dream home. Home improvement loan is one such much needed loan to fulfil the rest of the needs of the home.  Well, home buying comes with a lot of other responsibilities like maintaining the home, taking care of the internal and external fittings etc. all these steps are necessary to keep your home safe and new.  Similar to any product that you use, your home also needs an upgradation, improvement, and maintenance. However, managing the funds for the same in one go is not easy especially for those who are already paying the monthly EMIs for the house; car and other policies. For such people, banks now have the provision of Home Improvement Loan.

What is a Home Improvement Loan?

As the name suggest, Home Improvement Loans are availed to construct a new floor in the house or get a repair done or in case you want to renovate your house . Home Improvement Loans works similar to home loans. It can be taken for a period of 10-15 years or more (depends on your pocket and banks from where you are availing the loan) and pay back the amount in the form of EMIs. Apart from the major construction or other work done in the house, these loans are also beneficial for things like electrical wiring, bathroom fittings, furniture etc.

Inclusions and Exclusions of Home Improvement Loan

This loan serves the purpose of house renovation but banks have defined certain work for which your home improvement loan will be sanctioned while for certain work you cannot get home improvement loan, here is the list of inclusions and exclusions:

Inclusions : Home improvement loan can be taken for construction and renovation work like building another floor ,making a new balcony, flooring work , plumbing, electrical work, painting, bathroom fittings or exterior elevations.

Exclusions: Home improvement loan is not sanctioned by the bank if you are buying consumer durable goods, like buying a new kitchen cabinet or a new wardrobe.

Eligibility Criteria:

  • Any homeowner who is willing to renovate or construct in his/her house is eligible to apply for home improvement loan.
  • You can apply for home improvement loan jointly with the co-owner.
  • The minimum age to apply for home improvement loan is 21 years and the maximum limit is your retirement age i.e. 65 years.
  • Even companies can apply for this loan but the company should be making profits in the last few years.

Those who have already availed home loan from bank, if you apply for home improvement loan from the same bank, the bank considers the total loan amount applied (this is inclusive of new application). The total sanctioned amount is not more than 85% (outstanding amiunt as well as new sanctioned amount together).

Processing of Home Improvement Loan:

  • In order to apply for home improvement loan, the borrower has to make a rough estimate of the renovation work and has to submit it with the bank.
  • In the case of extension work, the approval plan also needs to be submitted in the bank.
  • Once the estimate is submitted in the bank, the banks carry out the physical verification which includes taking the measurement, pictures of the house to correlate with amount submitted for a loan.
  • Once the verification process is done and bank approves your application, the loan is disbursed.

What if you don’t have a home loan?

Home improvement loan is not restricted to those who have availed home loan, for those who want to start a fresh, you don’t have to worry; you have to follow a similar procedure of a home loan to avail and approval of the home improvement loan.

Submit all the income and property documents to get your loan sanctioned. The processing fee of home improvement loan ranges between .5% -.75%.

Is there any other option?

Personal Loan – Well, you can opt for a personal loan as well. People in a hurry to avoid a lot of procedures and paperwork avoid getting the process of home improvement loan and plan to avail the personal loan. Although it is a bit easier but at the same time it can be a bit heavy on your pocket primarily because personal loan comes with a higher interest rate. On the other hand, home improvement loan’s interest rates are cheaper and it is considered to be more secure as compared to the personal loan.

Top –up loan – You can also opt for a top-up loan. If you already have a home loan you can take a top-up loan on this. But an important point to note here is that this loan can be taken only after a certain number of years of your home loan. Most of the banks mention the number of years between  3 to 6. The interest rate is base rate plus some percentage. If a bank has offered the home loan at an interest rate of 10 % and you apply for a top-up loan, then your top-up loan interest amount will be 11.25%. The top-up loan is cheaper than a personal loan.

Top-up loans are sanctioned for 70% of the total property value but this may vary as per the market value and the borrower’s ability to repay the loan. A processing fee of top-up loan is between .5 %-.75% of the loan amount.

We hope this would have enlightened you with the right option if you are looking for renovating your house.  For the same and any other home loan related queries and needs, you can log on to our portal and we will assist you with the best option to make your home buying an easy one.


Car loan. What you should know

Car loans and is it important to go for a car loan

Having a home and a car is one of the glorious milestones of life. Thanks to the advent of various financial institutions and banking systems which offer car loans, it has become very easy for people to fulfil their dreams of owning a car.  We all want that shiny little set of wheels standing in the parking place of our house. Well, with the help of car loans you can easily fulfil your dreams now.

All the private and public sector financial institutions in India offer car loan. Similar to another loan, you need to submit documents like ID proof, income proof, and credit history to qualify the bank’s eligibility criteria and avail the car loan. Aadhar card is mandatory.

Why Choose a Car Loan?

Some people dread loan. They don’t want to get trapped in the web of EMIs but, banks and financial institutions have come up with customer-friendly policies which make availing car loan stress and hassle-free process.

If you go ahead with car loans, you get two benefits :

  • We all know that cars come with a hefty cost, car loans have emerged as an easy way to buy a car.
  • A massive purchase like buying a car with cash can make you come in the radar of Income Tax department. Furthermore, you might lose an opportunity to build up credit history which may later be used to avail home loan.

Car Loans – Features and Benefits

Here are few other sets of benefits which car loan has to offer and make you choose it.

  • With the help of car loan, you can buy a better car than the one which fits your budget.
  • You can quickly buy the car with the help of car loan, which otherwise would be difficult if you want to buy it by arranging the money.
  • You can manage the cost of purchase by distributing it across a longer duration regarding EMI. This makes it easy for you to pay back for the loan without affecting your pocket too much.
  • Car loans in India are mostly secured which means the car serves as a security for the loan. Thus, posing a little financial risk to you.
  • Availing car loan is simple.
  • Car loans are often based on fixed interest rate when it comes to EMIs. It means that you have a fixed amount that has to be given every month. It ensures that you can plan your monthly budget.
  • The repayment tenure of car loan ranges from 5 years to 10 years.

Thus, if you are willing to buy a car don’t delay the decision. Contact your bank, and you can open the gateway to bring in your dream car.

Booking a cab or Buying a car with car loan.

You can book a cab whenever you want to wherever you want. If you are going to office in a cab and weekend getaways are always on a hired car, calculate the amount you spend every month. Instead buy a car where you can afford for the EMI. Car loans come at a very low interest rates. Instead of having the head ache of booking a cab every now and then, buy your favourite car by going for a car loan at a lowest interest rates.

What does? know to offer loan at the lower interest rates from many lenders. Car loan is important when you go for buying your favourite car. We understand your need. Hence, we keep it simple for you by letting you know the lower interest rates, getting the loan disbursed from your favourite lender. All you need to do is give a missed call to 040-71011991. We will follow the rest.

Car Loan Interest Rates

Well, buying a shiny and glamorous four-wheeler is the dream of many individuals. But, in a nation where most of the people in middle class and have restricted source of income, spending the hefty amount in buying a car can be a costly affair. The time has changed, we are now living in a world where banks and financial institutions are offering car loans and car loan interest rates at affordable EMIs.

Car loans are not only easy to avail but also a great way to buy a car. However, you must know that car loans interest rates may vary from one bank to another. Apart from this, you must also qualify the eligibility criteria mentioned by the bank to avail car loan.

Here is a quick view of the  car loan interest rates offered by different banks and financial institutions :

Bank Name Interest rate Processing Fees Loan Amount Loan Tenure
HDFC Fixed Interest Rate- 8.40% – 10.35% Up to ₹ 4720 (it’s a one time fee) Minimum ₹ 1 Lac 1 -7 years
Axis Bank Fixed Interest Rate- 8.60% – 11.50% Up to ₹ 5000 Minimum ₹ 1 Lac
  1. 7 years
ICICI Fixed Interest Rate- 8.40% – 13.25% Up to ₹ 5000 (its one time fee) Minimum ₹ 1 lac 1-7 years
Dena Floating Interest Rate-9.15% ₹575 (it’s a one time fee) Minimum ₹ 1 lac 1-7 years
Federal Bank Fixed Interest Rate-9.75% ₹ 1500-  ₹ 2500 (it’s a one time fee) 1-5 years
Bank of India Floating interest rate- 9.25% ₹ 500+ ST ₹ 50 lac – ₹ 1 cr 7 years
Canara Bank Floating Interest Rate- 8.60% – 9.25% ₹ 1000 – ₹ 5000 7 years
Bank of Maharashtra Fixed Interest Rate- 8.95% 7 years
Indian Bank Fixed Interest Rate- 9.95% 0.229% (max. ₹ 10,191/-) (It’s a one time fee) Maximum ₹ 2 crore 7 years
Central Bank of India Floating Interest Rate- 8.70% Maximum ₹ 75 lac Seven years
IDBI Bank Fixed Interest Rate- 9.10% 0 7 years
L&T Finance Limited Fixed Interest Rate- 16% – 17% 2% Minimum ₹ 1 lac 7 years
Reliance Commercial Finance Fixed Interest Rate- 16% 1.25% (Min. ₹ 5,175)( It’s a one time fee) ₹ 50K – ₹ 15L 1-4 years
Yes Bank Fixed Interest Rate- 10.25% – 12.25% ₹ 5,000 to ₹ 10,000 (It’s a One time fee) Minimum 1 lac 1-7 years
State Bank of India Floating Interest Rate- 9.05% ₹0 7 years

What Loanyantra can do for a lower car loan interest rates :, known for the quickest disbursal and fastest process also helps you get loans from your favourite bank at lower interest rates. If you have a home loan, you can easily get a car loan from the same lender and at a lower interest rate. Get more tips and easiest ways from Also avail cash back offers on the car loan interest rates.

Which is the best way to repay the housing loan faster?

Pre-Payment is not the only way to close your loan faster. To close the loans faster we can follow the 3 different methods.

I will be giving you a detail advantage of each of the method.

  1. Increase your EMI
  2. Make a part-payments
  3. Loan as OD account product
  4. Monitor you loans and correct to lower rates when ever possible.

Let me explain in detail of each of the method

  1. Increase Your EMI :

This option to be used when you have more monthly savings and want to be debt free faster. Very important here is more monthly savings. Keep the sufficient buffer from your salary for living expenses and additional 10% as the buffer so that you don’t by increasing the EMI later day you don’t have tough time.

Increasing the EMI is much better option if you have steady flow of income and if you are planning to save some money and make a part-payment, then mathematically its better to increase the EMI. For example if you have to increase your EMI by Rs 5000 or saving Rs 5000 every month and after 12 months you make a saving of Rs 60,000/- and make a part-payment. Option 1 is better as it would contribute towards principle every month compare to after 1-year. You might be saving at-least extra Rs 2000 more.

One important thing to note is , most of the banks allow you to increase your EMI but very few allow you to decrease the EMI amount. So think before you do.

2. Make a Part-Payment :

This option to used when you have a lump sum amount received in the form on Bonus or when you have sold something and received the amount. Its said to keep things simple and stupid always clear your loans when ever you get a lump sum amounts.

One important thing to note is , each bank follows specific rule while receiving the part-payment. In case if you are walking to the branch mostly minimum part-payment should be 1 month EMI. If you are planning to pay via online it might be minimum 3-months EMI. Note each bank has its own policy, so please check.

3. Loan as OD account product

This option can be used if you have availed a special loan product which provides OD facility. Let me explain what is OD Facility for the Loan. If you have availed a 50 Lac loan and say you have got 10 lac as bonus. Now if you transfer the 10 Lac to your Loan OD Account then Interest would be charged for only 40 Lac amount. Now after a 1-year, if you like to withdraw the 10 lac, then you can withdraw the amount as its parked. Then from that day what ever is the principle left, bank will be charging interest on the pending amount. What ever interest you have earned on 10 lac will be adjusted toward the principle. This allows to close the loan faster.

All banks don’t provide this products. Banks like Bank of Baroda, SBI , Standard Charted & IDBI have this option. These days banks are charging 0.10% to 0.20% more for this product. So avail them only if you are receiving a lump sum amount and want to use it later day or else make a part-payments to close the loan faster

4. Monitor you loans and correct to lower rates when ever possible.

This option is least used but most powerful one with very little payment. When ever rates fluctuate one need to compare how his/her interest rate compare to ongoing market rate. In case if you are paying higher rate then ongoing we need to check are you going to really pay higher next change or not before correcting.

Interest rate has two components,

Interest Rate = MCLR(Base Rate) + Margins

When you avail your loan in variable rate, the margin gets fixed. So say you availed a loan at 8.50% where in MCLR is 8.00% and Margin is 0.50%

Interest rate = 8.50% = 8.00% + 0.50%

Next change if MCLR(Base rate) changes to 9.00% then your rate would be 9.50%

if it become if MCLR(Base rate) changes to 7.00% then your rate would be 7.50%

Now suppose, if you are paying 9.50% at a given time and in the market if the new customer is getting at 9.25% then we have to check why is he paying 9.25%

There can be 2 cases .

  1. He is paying lower margin then you. Say MCLR(Base Rate) is at 9.00% and his Margins are only 0.25% then its a time to correct your margins from 0.50% to 0.25%
  2. He is paying higher margin then you. Yes its possible if the MCLR(Base Rate ) is at 8.50% and Margins are at 0.75% then he would still pay 9.25% 0.25% less than you for 1-year. But later after 1-year if the MCLR(Base Rate) changes to 10% then you would be paying 10.50% where as this person is going to pay 10.75%.

Note : Lower doesn’t mean lower always. It can be only for a short time. Loans are normally tend to be longer specifically Home Loans. So Manage them well. We help you managing all this to close your loans faster for more help check Manager my Loan

We are specialised in this process. Avail all services at free of cost.

Indiabulls dhani personal loan

Personal loans exclusively from Indiabulls dhani personal loan features quick, easy and fast personal loans.

After five years of study, it is stated that the search is majorly from mobiles than from PCs and laptops. So, Indiabulls came up with an innovative personal loan feature known as Indiabulls dhani personal loan.

What is Indiabulls dhani personal loan?

To make you reach your financial needs with much ease, Indiabulls introduced first of its kind, loans from phone, called Indiabulls dhani personal loan.

Do you have an Aadhar card? If yes, then the personal loan is sanctioned and disbursed through your phone to your account.

Never miss any of your needs, any of those pending vacation, any of those dream aims. Celebrate your life with this new feature in your phone. Fulfil every dream by attending to it financially within minutes.

How does Indiabulls dhani personal loan work?

It works in three steps.

  1. Download the app in your phone from playstore or app store.
  2. Enter your loan amount, aadhar number.
  3. Get money in your account instantly.

Indiabulls dhani personal loan – features and benefits

  • Use your smart phone, know your aadhar number. That’s all you need to know to get maximum Rs. 15 lakhs amount in your account as personal loan.
  • Never leave your dream unfulfilled – As the process is so easy, it just takes seconds to get your dream true.
  • The lean interface leaves the user with quickest experience with fastest loan disbursement.
  • No need to apply your documents. Just enter your aadhar number and get the loan amount disbursed in your account.

How Loanyantra helps

Personal loans through Loanyantra is the best way out there in the market. Know every detail about every product, every feature about each loan. Loanyantra is known for its customised service with happy feedback. Manage your loan through our dedicated customer relationship manager. Receive market updates and interest rate changes as and when there is a change. All you need to do is just a missed call to 040-71011991.


SBI increases lending rates

The State Bank of India (SBI), India’s largest PSU bank, on Thursday, raised lending rates from 7.95 percent to 8.15 percent. SBI increases lending rates for the first time since April 2016. SBI is the first one to implement the MCLR based calculation for loan interest rates when MCLR is introduced an year ago.

There is no change in RBI policies since two quarters. But, it is observed that SBI increases lending rates. Liquidity tightening, rise in bond yield, credit demand pick up and other profitability issues are pushing the banks to up the interest rates

Just a day after SBI increases interest rates on fixed deposits, SBI increases lending rates. SBI term deposits for 7 to 45 days will earn an annual interest rate of 5.75 per cent, up from 5.25 per cent earlier. For one year deposits, SBI customers will now earn 6.40 per cent from 6.25 per cent earlier, while those deposits maturing between two years and 10 years will earn 6.50 per cent, compared with 6 per cent earlier. For senior citizens, the revised interest rates are 7 per cent on their deposits, up from earlier 6.50 per cent.

Another state-run bank PNB also raised its lending rate, effective March 1, 2018. PNB raised its one-year MCLR rate to 8.30 per cent from 8.15 per cent.

SBI increases lending rates
SBI increases lending rates – EMIs to go up

Many banks have been increasing their deposit and lending rates since the last quarter. While lending rates have been jacked up on an average of 5-10 bps by private sector lenders like HDFC Bank, Axis Bank, Kotak Mahindra Bank and Yes Bank since January, almost all the state-run lenders have been increasing their bulk deposit rates in the range of 15 bps to 125 bps.

SBI’s new marginal cost of funds-based lending rates with effect from March 1, 2018, as shared by the bank on its website –

Tenor Existing MCLR (In %) Revised MCLR (In %)
Overnight 7.7 7.8
One month 7.8 7.8
Three months 7.85 7.85
Six months 7.9 8
One year 7.95 8.15
Two years 8.05 8.25
Three years 8.1 8.35

What loanyantra does for you while SBI increases lending rates – 

Get the loan from best of banks. Know every bank’s lending rates and choose your favourite one. Be the first one to know about every lender in the banking sector. Our dedicated Customer Relationship Manager will help you through every step while you choose home loan for your dream home.

How to Buy a Business With Poor Credit-Business Loan

Getting a business loan with bad credit to buy a business is challenging and requires the business to have enough assets to meet the lender needs.

Your Credit Profile
Before you jump into applying for loans to buy a business, examine your own credit. You may assume you have bad credit, but it might not be as bad as you think. Take the opportunity to clean up any errors or pay down other debts to improve your credit profile.

Personal credit reports are available through any of the three reporting agencies: Experian, Equifax and TransUnion. You can also check with an existing bank or credit card company to see if it offers free credit reports. Review the report for any errors. Contact reporting companies about errors with proof of payment, such as a receipt for having paid a bill on time.

If there isn’t much you can change in the report, prepare to explain negative issues on the report, why there was a problem and what you have done to rectify it. If you were ill and out of work for a period of time and were late on payments, an explanation might help during the loan underwriting process.

The Business Credit Profile
Gather all the financial information about the company you are purchasing. An owner who is reluctant to provide information may be hiding something. Obtain bank records, merchant services, account transactions, inventory numbers, vendor sheets and tax returns. Look back at least two years, longer if possible.
Request budget items such as payroll and lease information. Gather any existing debt owed on the business including open lines of credit. You need to know what the business pulls in and what its expenses and liabilities are.
Write a business plan detailing the successful history of the business and project the growth out for the next five to seven years. The business plan helps lenders get a real picture of what the loan is used for. Most business loans are unsecured, meaning there is no collateral. All of these records help you and the lender see if there is an asset to tie the loan to – perhaps real property, inventory or merchant receipts.

business loan with bad credit
Business loan with bad credit

Applying for Credit
Whether you are starting a new business or buying an existing business, make an appointment to review the entire plan with a Small Business Administration counsellor. This person may be able to improve the plan so it better suits what a lender seeks. The counsellor also has relationships with lenders who specifically provide SBA loans.
Whether you go through the SBA or go directly to a bank or credit union, make your package as professional as possible and look like a business owner when you meet with lenders. While you are a customer, lenders view their role more as investors and want to work with professionals. Complete the application and present the entire package as supporting documentation.

Alternative Ideas
If you are denied a loan, ask the lender about having a credit partner. A credit partner is a co-signer to the loan, using their positive credit and maybe industry experience as a mentor to the company. You will probably need to give up a percentage of ownership to get a credit partner, but this might be the only way to establish the credit to buy the business. If you still can’t get a loan, look to private investors within your network or microlenders involved with local economic development agencies in your area.

What Loanyantra can do for your business loan?

Loan in five minutes. Get to know different bankers, different interest rates. Get a call from them and get customized quotes. Explain your business details completely for business loan. Get credit report and get an analysis done and know your business’s eligibility.


How to Calculate a Loan Loss Provision Coverage Ratio

How to Calculate a Loan Loss Provision Coverage Ratio

Loan loss provisioning is a systematic way of handling risks rationally, signalling managerial prudence. Banks across the globe follow a dynamic provision policy. Sometimes, a well – designed policy is not enough to safeguard the interests of all the stakeholders. One such prominent and time – honoured modus operandi to face contingencies is the rate of provisioning to be set aside annually to meet any contingencies.

Banks and credit unions are in the business of lending money to individuals, families and businesses. But not every loan is repaid in full; in fact, many banks lend to risky borrowers by charging high interest rates. To stabilize earnings and remain solvent in bad times, banks estimate losses and seek to hold enough capital to absorb future write-offs.

Estimated Losses: Loan Loss Provisions
The loan loss provision is a balance sheet account that represents a bank’s best estimate of future loan losses. Suppose that a bank extends a Rs.5,00,000, five-year loan to a gas station in its community. If one year later the borrower runs into financial problems, the bank will create a loan loss provision. If the bank believes the client will only repay 60 percent of the borrowed amount, the bank will record a loan loss provision of Rs.2,00,000 ((100 percent – 60 percent) x Rs.5,00,000).


Loan loss provision

Actual Losses: Net Charge-offs
Some time after creating a loan loss provision for a worrisome loan, a bank will discover how much the borrower is actually able to repay. At that moment the bank will record a net charge-off — the amount of the loan that will never be repaid. In the earlier example, suppose the bank is only able to collect Rs.1,00,000 from the gas station. In this situation the net charge-off would equal Rs.4,00,000 — an amount even greater than the original loan loss provision.


Loan Loss Provision Coverage Ratio
The loan loss provision coverage ratio is an indicator of how protected a bank is against future losses. A higher ratio means the bank can withstand future losses better, including unexpected losses beyond the loan loss provision.

The ratio is calculated as follows: (pre-tax income + loan loss provision) / net charge-offs.

In the earlier example suppose that the bank reported pre-tax income of Rs.25,00,000 along with a loan loss provision of Rs.8,00,000 and net charge-offs of Rs.5,00,000. Its loan loss provision coverage ratio would equal 6.6 (25,00,000 + 8,00,000) / 5,00,000.

Insights Into the Economy

Loan loss provisions are important not only to banks but to the broader business community. During difficult economic times, loan loss provisions and net charge-offs spiked as borrowers struggled to repay their debts. Loan loss provisions and net charge-offs can therefore serve as useful indicators of the overall health of the economy.

How Loanyantra helps

The bad debts to the banks make them run short of money and this will always make the banks increase the loan interest rates. Loanyantra’s customers will know it before hand, as our team constantly track the loan’s interest rate and sends alerts. Also know about different banks interest rates and get into the bank whose interest rate is lower and a process where you can finish the loan earlier.


PNB-Nirav Modi Scam. What did RBI do?

Is giving Letter of Credit / Letter of Understanding to Nirav Modi is a mistake by PNB?

Actually, according to the banking procedures, there should be  a collateral while lending money. Any lender should not lend money without taking anything as a guarantee.

So, PNB had given a letter of credit stating that PNB guarantees the on time repayment of the loan by Nirav Modi. This had become a common practice by the nationalised banks. For India to grow, these are the small steps taken and the authority given to such high officials. So, to be frank it is not a wrong step by PNB to Nirav Modi.

Another important thing while lending money is, while the borrower is already with an existing loan, the top up loan cannot be sanctioned without looking into the repayment details and guarantor details.

This is the wrong step by the letter of credit issuer and the lending banks that they blindly follow the brand as a guarantee from the borrower instead of looking at the details of their repayment status and credit score. Now, it is  a shock to PNB and the other lenders also as they have to face such huge bad debt.

PNB - Nirav Modi case
PNB-NiravModi Case – A big lesson to the whole Indian Banks and RBI.

PNB-Nirav Modi’s case is the same issue as Vijay Mallya’s case. Under Vijay Mallya’s case, the banks had given credit loan of 25 crores by taking the logo of the company as a guarantee. Under PNB-Nirav Modi’s case, the banks had given loan on one LoU, which is really ridiculous. The common man should roam around multiple banks just to get a simple personal loan to fulfil his needs, Whereas the so called promoters get the loan so easy that they can skip the loan and can roam away from India.

Will this misuse by so called bureaucrats influence common man? How?

The scams like PNB-Nirav Modi, Vijay Mallya, surely influence the banks’ economy and state’s growth. When there is such huge bad credit, the banks will not be in a state to pay the Fixed Deposit Interest Rate or Fixed Deposit withdrawls. This makes the banks increase the loan interest rates atleast by a minimum to cover the loss. So, ultimately, it affects the common man paying the loan interest rates.

Axis Bank (one of the lenders in PNB-Nirav Modi case), had already raised the MCLR to 10 basis points, leading to increased lending rates,the second time in last two months.

How did the NPA (Non Performing Assets ) problem become so big?

There are many reasons and no one reason can be attributed as the biggest problem. In some cases, it was just a case of bad promoters taking too much debt and even siphoning off money instead of trying to run a tight ship. They were in turn abetted by lax bankers who did not do much due diligence and also politicians who helped them get loans. In other cases, there were genuine reasons like telecom or mining licenses being cancelled after much money had already been sunk. In still other cases, it was the shortage of gas supplies from the KG basin, on which the project depended on, or dumping by Chinese in some goods. And then there were cases of over ambition where the promoters bought and expanded indiscriminately without having the management depth or the resources to run the companies properly.

The biggest reason for the NPA problem was that the banks got swayed by big project plans of businessmen and simply did not take enough precautions or enough due diligence.

What did RBI do for a solution after PNB-Nirav Modi case?

The new guidelines have specified framework for early identification and reporting of stressed assets. The Reserve Bank of India (RBI) on Monday came out with a revised framework for expeditious resolution of bad loans, harmonising the existing guidelines with the norms specified in the Insolvency and Bankruptcy Code (IBC).

“In view of the enactment of the Insolvency and Bankruptcy Code (IBC), 2016, it has been decided to substitute the existing guidelines with a harmonised and simplified generic framework for resolution of stressed assets,” the RBI said in a notification issued after the PNB-Nirav Modi case came into light.

All lenders will be required to submit Central Repository of Information on Large Credits (CRILC)- Main Report to the Reserve Bank on a monthly basis effective April 1, 2018.

In addition, the lenders shall report to CRILC, all borrower entities in default (with aggregate exposure of Rs 5 crore and above), on a weekly basis, at the close of business on every Friday, or the preceding working day if Friday happens to be a holiday. The first such weekly report shall be submitted for the week ending February 23, 2018, with a view to harmonise the guidelines with the norms specified in the IBC, said the notification while withdrawing existing mechanism for dealing with the bad debt in the banking system. The new guidelines have specified framework for early identification and reporting of stressed assets.

If this practice is observed strictly, from now on, there are chances for many defaulters to come in light like PNB-Nirav Modi case. There are chances, in future to reduce the bad debts number.

But as of now, because of PNB-Nirav Modi’s case, 11,000 crore debt, it is sure that there will be an increase of lending rates.

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