Personal loans that are an easy route to get access to funds at the time of economic slowdown are no more going to be a simple means of borrowing. As banks are suffering with higher number of delinquencies in their personal loan portfolio, sanction has been stopped to avoid further rise in non-performing assets (NPAs).

Banks and financial institutions have been forced to withdraw this service and if at all they are extending, only the salaried customers having accounts in the respective banks will be able to avail the loan. The businessmen and self-employed people are not eligible for availing personal loans.

The banks have taken the move at the backdrop of rising NPAs in the personal loan segment. The NPAs for the banks have almost doubled in the recent times and reached to around 4% as compared to 2% in 2007.

UCO Bank said that personal loan segment were worst hit amid the slowdown as they are not backed by collateral. "As personal loan is an unsecured loan (where no collateral is required), a number of borrowers in Punjab and Haryana have become delinquent. The NPA level in housing and auto loans is also going up, but recovery here is better as house or car is a collateral security," said Ripan Murgai, field general manager, UCO Bank.

"In Haryana, the NPA in personal loan segment has gone up by over three per cent. Though the economic downturn is one of the main reasons for delinquency, the debt waiver announced for various sectors by the government has also created a bad credit culture, with people desisting from paying back their dues," he added.

In fact some banks have started their stressed assets management cells to avoid the risk in their personal loan segment. SBI has put some of its newly appointed staff in their recovery cell so as to speed up recoveries on personal loans, home loans and finance against immoveable properties.

Moreover banks are restructuring these personal loans so that they do not fall into the NPA category.