HDFC Insta Loans: Lead by Example Product?

• 30 May 2019 | 2453 Views | By Mint2Save

For every new age entrepreneur, for every new rising NBFC, for any Bank initiating commercial operations, a prime source of inspiration is HDFC Bank’s journey. Arguably, one of the most prestigious and future oriented Banks which represents growing economies, HDFC Bank has created a financial niche of its own.

Rightly documented by Tamal Bandhopadhyay in his book, A Bank for the Buck, this multi level commercial cum investment identity, has been the direct or indirect reason for many thriving industries, as well as several futuristic operations.

One of the critical factors for its success and massive yet increasing acceptance among public is highly consumer oriented products and consistent innovation in the same. From innovating the supply chain management, to defining priority consumers and brining internet payment solutions closer to small businesses, HDFC Bank has microscopically observed its consumers and their needs. It is due this extensive research and consumer centric approach that most banks and NBFCs tend to follow HDFC Bank’s product catalogue with no or minor changes.

In this article, we cover one such product from HDFC Bank, which is indeed quite ahead of its time, HDFC Insta Loans. Deriving itself from the credit cards, HDFC Insta is a result of an algorithm based customer profiling. Once a customer requests for the loan, the algorithm processes the loan based on his past credit behaviour, card limit, number of open credit lines and other critical factors.

Let’s explore this new age lending product and how HDFC has tried to grip its credit card customer base with it.

HDFC Insta: Overview

• HDFC Insta is a customisable personal loan, which is available for its credit card customers, irrespective of the fact that whether they hold an account with HDFC or not.
• Upon receiving the request, the loan is processed almost instantly and post sanctioning, the credit into the applicant’s HDFC Bank account is on immediate basis.
• If the applicant doesn’t has a savings account with HDFC, the credit is made via Demand Draft, drawn in favour of the applicant’s Bank account, as per the records of HDFC credit cards.
• Interested applicants can apply via the credit card portal, or connect through the phone banking line.
• The facility is available all time and requires no brick and mortar banking approach.

Features

The features explored here are excluding the usual features of a personal loan and hence, are not less than a USP of this product.

• Nil Paperwork: Major USP of this personal loan is there is nil documentation. Since the process is based over the internet, there is no requirement for filling up any forms. Further, there is documentation post sanction of the loan. Post sanction documentation usually takes at least a day under a usual banking channel.
• Less Turn Around Time (TAT): Being entirely online process, HDFC Insta credits the required funds into your account on an immediate basis, if the applicant has a savings account with HDFC Bank. Usually all loans, including personal loans, take from anytime between 2 days to 7 days. Here, the urgency of the loan is realised and hence, the quick disposal.
• Customisable: The tenure of the proposed loan and the repayment date can be decided by the applicant. Thus, allowing him to ease down the financial pressure when repaying the loan.

Cautions while Availing the Loan

• While the loan is being presented as a fair solution for liquidity, it is indeed a personal loan and is advised to be sought only in the cases of extreme shortage of funds.
• The HDFC website keeps mum on the interest rates, penalties. This can be owed to the reason that the loan is customisable, and the eligible amount and interest rate is decided only after the financial profile of the applicant is judged by the Bank’s algorithms.
• Further, the website is also silent on the service charges, processing fees and loan review fee. These non interest charges, form a major part of hidden fees, which can surmount to result in unpleasant banking experiences for the customer.
• Since the loan is derived out of credit card limit, the interest rate charged, might be shown on a monthly basis, which makes the loan seem affordable. However, monthly compounding of interest rates can increase the overall burden on the borrower, when annual rates of conventional personal loans are brought into the picture.
• The loan’s EMI shall be added to the minimum amount due (MAD) in the billed credit card statement. Thus, the applicant has to manage his finances in such a manner that minimum balance due is the threshold he / she has to meet. Any amount short of the MAD will attract penalties along with GST. Further, the outstanding balance shall also attract GST as interest charged upon it would be categorised into a service.
• Since it is another type of unsecured loan, missing even a single repayment can massively impact your credit score in an adverse manner. Since, CIBIL scores are based on recent data, it can take some considerable amount of time to improve the scores and bring back them to normal.

Conclusion

HDFC Insta is one of the much needed credit facility when the criteria of financial emergency for masses is considered. It uses data in a very efficient manner and becomes a very convenient solution, once the interest and non interest income factors are kept aside.

Credit card based finance is widely accepted for its ease of access, digital transaction interface and safety features. Insta is also a type of credit card based product, since its derived from credit limit for card users.

When the fintech scenario is taken into consideration, new lending startups are popping almost everyday with tremendous amount of funding. Introduction of such products, has enabled HDFC bank to not only retain its existing customers, but also attract new ones to its portfolio.

A usual approach towards assessing an unsecured loan such as this one, is realising the necessity of funds, which, this product has been comprehensively aligned for. It claims to take less TAT, use a fully digitised platform and remove all the paperwork related to the exhaustive pre sanction and post sanction documentation.

All that a customer needs is a credit card from HDFC removes all pre-requisites of having KYC verified, pre-sanction inspection, and other due diligence methods, adding nothing but comfort for the customer.

One can get a loan irrespective of his profession, bank account, location, age, gender, income source, etc., thus adding a lot of potential to gather business.