It entails servicing of a large number of accounts requiring substantial manpower, but its promotes the consumer and retail industry in a big way.
Consumerism gets a huge boost as the aspirations of the people for a better lifestyle is achieved through personal loans, educational loans, auto loans, consumption loans, housing loans, credit cards receivables.
These loans are repaid over the duration of the loan period agreed at the time of sanction/disbursement of the loan amount.
The interest charged is higher in case of unsecured loans as the element of risk is comparatively more.
The bank by charging higher interest rate tries to earn the maximum income from these accounts as likelihood of default is higher.