Current scope of Indian loan sector: Things you should know
The ever expanding financial sector has revolutionised the way banks operate. Gone are the days when your application for loans in India across public sector banks were completely dissected, only to leave you empty handed when you were in dire need of financial reinforcements.
Fast forward to the present, you can see a stark contrast in how loans are allocated. The trend has changed for the better, thanks to the contributions of various key factors. Here are a few steps that brought about this new-found zeal and overhaul in the Indian loan sector.
- Use of Technology
Nowadays, every bank you hear about offers a multitude of services through their online banking mechanisms. The regulations have changed, giving you access to everything you need at the click of a button, right from the eligibility criteria and documents required to the approval of your loans online and the exact date of disbursement. The same wasn’t the situation a decade ago. You’d have had to endure a dozen trips to the general manager’s cabin with no surety of the approval of your loan. At present things have changed and several financial service providers, like Bajaj Finserv, allow for online home loans in India, which they will disburse within a week’s time.
- Institutionalising Credit Rating System
Credit Information Bureau India Limited or, simply put, CIBIL is the country’s first credit information company, which collects and maintains loan records and credit card details of an individual’s payment from member organisations on a monthly basis. This makes way for Credit Information Report (CIR) which is in turn used by lending institutions to determine whether an applicant’s maintained credit score is enough to sustain a loan repayment.
- Base Rate System
Base Rate system, in general terms, implies that no lending institution can provide loans below a certain interest rate to gain an unfair advantage over their competitors. This system has brought about a transparency level as the lending agencies need to disclose their base interest rate to their consumers. It also was able to tackle the complaints of underselling tactics that was seen with the Benchmark Prime Lending Rate (BPLR) scale. Read More On : Different Types Of Loan In India
- Renewed Perspectives
Earlier when private entities were setting up shops and surveying the market, prospective borrowers had to resort to public banks, who’d drag the loaning process for longer durations than necessary, leaving the borrower frustrated. Now the perspectives of the lending institutions have changed, and this has changed their attitudes towards their clients. Take for instance lenders like Bajaj Finserv, who provide personal loans in India or any other loans for that matter, with instant approval schemes.
These aforementioned changes to the banking sector have resulted in the effective system that we witness in the market right now.