Loans before the COVID-19 pandemic
Since the financial year of 2016, retail loans were the holy grail for most major banks to augment their loan books. These loans include both personal loans and business loans. By reason, the loan segment saw a rapid growth of 18% between September 2018 and September 2019.
At the cusp of 2019, RBI emphasized the dangers of relying on retail too much. It was suggested that while this played-out well with risk mitigation, it had its downsides. The downshift in consumption and economic growth might impact the demand and quality of retail loans.
The demonetization of small businesses along with default of Infrastructure lender in IL&FS deepened the afflictions of banks already. COVID-19 could now be a bitter taste when it came to instant personal loans and business loans.
Impact of COVID-19 on the loan situation
The halt in the economy had major repercussions, most significant being the impact on banks. With pay-cuts, salary deferrals, and the loss in revenue for businesses as well as individuals, defaulters were on the rise. With the increase in rate of interest on instant personal loans and the slowdown of cash flow for businesses, people’s lives were in turmoil as well.
To tidy up the temporary liquidity crunch that the pandemic caused and help people through tough times, banks launched instant personal loans called COVID-19 personal loans.
COVID-19 personal loans – what you need to know
The COVID-19 personal loans are low-interest loans launched to help people sort out the crunch because of the corona pandemic. Here’s what you need to know about these loans
- Only existing customers with a salary account as well as home loan customers with a high credit score can make use of this scheme.
- The amount offered depends on the existing loan value and the monthly salary of the client. The maximum amount that can be offered is ₹2.5-5 lakh.
- The interest rates provided are less than instant personal loans and are within range of 8 to 15 percent per annum.
- The loan term can vary from 3 to 5 years.
- These loans carry no prepayment fee and have less processing fee.
Even though these loans offer a low rate of interest, those who are not affected by the pandemic shouldn’t consider taking the loan. A loan is a loan, after all, it needs to be paid back with interest.
So, if you’re looking for an online personal loan in India amid the pandemic because of liquidity crunch, COVID-19 personal loan can help. If you’re financially affected, an online personal loan in India may be of great support for you to reduce your financial burden.