Banks ask borrowers to cover their personal loans, overdraft facilities

The banking sector, reeling under a rise in non-performing assets (NPAs) from the corporate sector, is seeking to hedge loans to individual borrowers. Increasingly, borrowers are being asked to buy insurance policies to cover their loans. "Covers with personal loans and overdraft facilities have gained traction in recent times. Both public and private sector banks are aggressively pushing these products to retail customers,&" said a senior State Bank of India (SBI) official. According to Reserve Bank of India data, outstanding personal loans, without housing, consumer durables, credit cards, etc, stood at Rs 12,817 crore at the end of December.Insurance industry players say at present, almost 30 per cent of personal loan borrowers are buying insurance covers. And, that is increasing at a fast clip. In comparison, the penetration in case of home loans is up to 90 per cent, mostly for loans between Rs 10 lakh and Rs 1 crore and around 75-80 per cent for an average education loan of Rs 4 lakh and above.

Source: Business Standard