In the last few months, we had witnessed the rise int he number of people taking loans. This was the result of falling interest rates and as a result of which the number of people taking these personal loans had risen considerably. Has any one ever pondered why are people suddenly taking so many personal loans??

Recently, reports have come in saying that RBI is suspecting that these loans have found thier way into the stock market and the bullion market. The banks have advanced personal loans without even asking the customers for the reasons for the loans. Now, given the way the stock market has behaved in the past one year, poeple have actually borrowed money on interest and have invested in the shares and real-estate for superlative returns. This has also resulted in the much talked bout liquidity in the share market.

On one hand its good for the share market as more and more people are investing but one should also see that the money that is being put in is actually borrowed on interests and if the investors are not earning anything on the money borrowed by them, then only God can save them.

To check the situation, RBI is likely to direct banks to not only ask for the end use wherever possible but also pay through a pay order, rather than cash.

Interestingly, over the past few months, many foreign and private banks have been selling personal loans for stock market and mutual fund investments.

That’s not all – home loans and other consumer loans like car loans too have come under scrutiny and the RBI is likely to ask banks to check the end use of these loans too.

It is believed that some of these loans too may have been diverted to the stock market.

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