Banks, NBFCs bet on loans against property

Falling unsecured loans Growth of credit card dues and unsecured loans has slowed (in %)

- ANUPREKSHA JAIN

Banks and non-banking financial companies (NBFCs) are turning to loans against property (LAP), a secured retail lending product, amid rising stress on the unsecured segment of retail lending.

A growing emphasis on lending to the micro, medium, and small enterprises (MSME) sector has also led to a significant growth in the LAP portfolio. Loans to MSMEs also fall under the LAP portfolio.

According to a CareEdge report, the MSME LAP market has grown over 50 percent to ₹11.3 trillion in the past two years. Within this, micro-LAP lending has surged 60 percent to ₹1.6 trillion.

LAP is a secured loan where the credit amount is sanctioned against a property pledged as collateral. MSME LAP is essentially a mortgage loan, allowing them to borrow funds by using their property as security.