New Delhi, July 28 -- Since personal loans are unsecured, banks are supposed to exercise due diligence before disbursing loan money to borrowers. Banks typically check the salary slips and the employment history of applicants to determine their creditworthiness. They also check whether the loan amount can be repaid easily in view of the salary indicated on the salary slips.

Banks may typically allow upto 20 times of monthly salary to borrowers as personal loans. For instance, if someone's monthly salary is Rs.1 lakh, the bank may approve a loan of upto Rs.20 lakh. To navigate this obstacle, some loan applicants in Dahod (Gujarat) were found to have inflated their salary slips to become eligible for a higher loan amount.

These loan appli...