The towering inflation figures have led to regulator Reserve Bank of India raising policy rates thereby leading to rise in lending rates.

Rising interest rates are turning heavy on the pockets of the small borrowers. This is quite evident from the rising NPAs in the home loan sector mainly from borrowers of loans upto Rs 2 lakhs.

"Since borrowers in this category primarily belong to the low-income group, the rise in rates has hurt their repayment ability," said a senior State Bank of India official.

It has been seen that with increase in loan amounts, the default rate has declined.

Bankers say that in the category of home loans upto Rs 10 lakh, majority of the borrowers could repay 50-60% of their loans.