HSBC, a leading global banking and financial services organisation, today entered the business of small personal loans in India, charging interest rates of 32-48 per cent per annum. | |
| The new loan product, HSBC Pragati Finance, is aimed at people who earn up to Rs 4,000-Rs 8,000 a month. The bank officials said the interest rate range may sound very high, but it is in line with competing products. |
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| Citigroup's Citifinancial and GE Money are among the large players which have loan products that cater to this segment. |
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| "The interest rates are as they exist now. The rates are certainly lower than what money lenders charge," said Naina Lal Kidwai, group general manager and country head, HSBC India. |
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| HSBC's immediate target is to reach the product to 10 million households in 25 cities that they operate through 46 branches. |
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| The product offering comprises personal loans ranging from Rs 10,000 to Rs 50,000 with no collateral or guarantee and the promise of processing a loan application within three days. |
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| The interest rate on small loans are meant to take care of the risk of defaults and cost of delivery and collection on a portfolio basis, said Nicholas Winsor, head-personal financial services, HSBC India. |
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| "The risk is of the unknown (customer who has had so far limited access to organised lending)," Winsor said, saying the interest rates on micro-finance are lower because the risk in micro lending is to a group of borrowers against dispersed individuals in personal loans. |
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| Kidwai said, "It was a very important market segment which we have traditionally not been in. India has a very low loan to GDP ratio of 3-4 per cent. There is huge opportunity for banks." The loan to GDP ratio is 30 per cent on an average in other Asian countries. |
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| HSBC quoting a Goldman Sachs report said India has a working population of 678 million, which will increase to 735 million in 2010. |
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| Ravi Subramaniam, head of HSBC Pragati Finance, said the idea is to build a credit imprint of those who do not still have access to organised sources for loans. |
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| "A good experience with a customer will result in lower a interest rate when the customer again approaches us for a loan," he said. |
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