Monday, June 13, 2005

Banks cutting back on personal loans

The enthusiasm with which banking institutions marketed personal loans in 2003/4 has now waned.

Sources in the banking industry say the large number of defaulters in the unsecured loans category have shored up the long standing problem of non-performing loans (NPLs), forcing most banks to review their lending rules.

5 comments:

Anonymous said...

Why would a bank lend to individuals whose default rate might increase if the In-duplum rule is passed?

It might be safer - as a shareholder in banks - I prefer they lend to the Govt & large corporates. Even though this is NOT good for economic growth how can banks take such a risk esp there is no guarantee of repayment!

bankelele said...

banks must lend money in order to grow, pay depositors, and be profitable - in doing so they take varying amounts of risk. governments always borrow but always repay (except Argentina), corpoorations tend to get lower rates, because they are considered low risk. but individuals are considered high risk, especially if they don't offer any security (such as building or car) for the loan.

lwandamagere said...

(except Argentina...and Mexico, Chile, Turkey, Brazil, Germany before WWII, Cameroon, Uruguay, heck even Kenya...)

Point is, lots of countries default on their debt. We just don't get to hear about it in the news if it doesn't involve private lenders.

see: http://www.asiasociety.org/policy_business/ASEAN2004/sovereign_defaults.pdf

lwandamagere said...

The link is: http://www.asiasociety.org/policy_business/ASEAN2004/sovereign_defaults.pdf

lwandamagere said...

Standard & Poors 2004 Sovereign Debt Report

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