Worried over the impact of rising interest rates
on borrowers, the government has asked all public sector banks to increase the tenure of loans instead of raising EMIs.
"The Finance Ministry has written to all banks to increase tenure in the light of rising interest rates," official sources said.
This will help in not increasing the burden of EMIs on borrowers and mitigate the possibility of default, sources said.
Banks have taken actions accordingly.
The nation's largest lender SBI and other public sector lenders like Vijaya Bank said they have already been doing it as they felt that there was a room for possible delinquencies as interest rates started pinching borrowers more and more.
They also said that they have received the letter from the Finance Ministry some days ago.
"We have already been doing it, in fact much before the Finance Ministry wrote to us suggesting to increase the tenor of EMI-based loans instead of raising the repayment amount as a prudential measure to avert possible defaults by our borrowers," SBI Deputy Managing Director and Chief Credit & Risk Officer AP Verma said on the sidelines of a Ficci-IBA banking summit.