A federal survey has revealed that banks across the US are putting stricter lending policies in place. The trend applies to all major categories but is especially evident in the case of consumer loans.

The July survey conducted by the Federal Reserve Bank covered senior loan officers in 52 domestic banks as well as 21 agencies and branches of foreign banks. The results showed that banks across the nation were enforcing tighter lending standards. The results also revealed that since the last survey in April, the demand for loans from both businesses and households had fallen.

The results of the federal survey confirmed that the year long credit crunch is here to stay for some more time as banks hold on to capital and make it difficult for people to borrow. The present tightness in credit markets is the result of the subprime mortgage defaults suffered by big lending institutions across the US.

The survey found that the restrictions on credit were hardest in the consumer loan sector with as much as 65% of domestic banks tightening lending standards on consumer loans and credit cards. banks have raised the minimum credit scores required for a credit card besides bringing down card balance limits. Around 60 percent of domestic banks had restricted lending norms for commercial loans and industrial loans.

-Kalyani Mookherji