After restraining themselves from offering personal loans for some time, the public sector banks have again started lending funds for personal needs of an individual.

Mr J.P Dua, executive director, Allahabad bank said, "Personal loans are again becoming a significant segment of retail portfolio. In fact, it is time the public sector banks occupied the space vacated by private sector majors such as ICICI Bank."

A senior official of State bank of Hyderabad said that the low interest rates being charged by the state-owned banks are luring customers.

He revealed that usually the interest rate on personal loans was 200 bps more than prime lending rate which was much lower than that charged by private banks and NBFCs.

A senior SBI official said that the bank viewed personal loans as a lucrative segment.and was not reluctant to offer loans. The bank would however consider the credit history and other parameters like disposable income before lending.

Relatively low credit demand in other sectors is also one of the reasond behind banks taking interest in extending personal loans.

According to the latest RBI data, bank credit rose by only 4.5 percent till October as against 12.1 percent last year.

On the other hand, private banks that were aggressive on personal loans till last year, are now a little reluctant in lending amidst rising defaults.