This year the tour operators are getting very less bookings for outbound travel even though the season has set in. The reason being there are few takers of travel loans as these loans are clubbed under the personal loan segment and for some banks this segment is not a top priority or have stopped giving personal loans. According to tour operators the decrease in demand may be due to economic slowdown and higher interest rates for travel loans. Tour operators say generally people choose to take travel loans for outbound travel especially to destinations like Europe, US, Australia and New Zealand among others. Summer holidays (April-July) alone account for 60% of the total outbound travel in a year. Last year around 10 million Indians traveled abroad.
According to Karan Anand, head, relationships and supplier management at Cox & Kings, "The concept of travel loans is still at a nascent stage. But it was beginning to catch up. However, we don't expect to see the same kind of growth we saw last year.'' Last year around 5-7% of the total travelers took travel loan, as many believe traveling abroad as a luxury. Cox & Kings has a tie-up with Citibank for the same.
At present there is enough of liquidity in the banking system but banks are unwilling to disburse loans as they fear could be on the default category. Another most important reason why travelers are keeping away from taking loan as the interest rate on personal loans come is high (12-19%) in comparison to housing, auto or education loan among others. Moreover, operators believe that people might be uncertain to undertake expensive holidays, at a higher interest rate, when in India pays are being slashed and also there are job cuts.
On the other hand bankers say that they don't have any data on travel loans, as they club it along with personal loans. An official working with a foreign bank stated, "We don't offer travel loans. Anyone who applies for a personal loan can use it for whatever purpose he wants to. We don't ask them any questions’’. He further added, "All we look at is the person's credentials, history, and his repaying capacity''.
Another private lender pointed out banks might not be interested in disbursing personal loans as they are unsecured and carry a heavy default risk. He added, "When somebody is going through financial difficulties, he or she is not likely to default on the housing loan. Most likely they are going to default on their personal loans first, then the car loan and only then they would think of defaulting on the housing loan. That is why personal loans are considered risky by banks''.
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In the marketplace lots of the banks and NBFCś are available that provide personal loan, but point is that which finance institutions provide low interest rate for personal loan, I have found a recourse from where you can check the rate of interest for personal loan before applying.
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