SPEAKING TO A NATIONAL CREDIT HEADOF A TIER 1 BANK IN INDIAMe: Sir what data touchpoints are critical for your underwriting process?Banker: I can look into the eye of the borrower and take a call if they will repay.Me (a little astonished but not showing on the face): Sir it is difficult for us to tell our systems or configure them to do that.But later I gave it a deeper thought and understood that one’s emotions and Gut feel also play an important role in the credit underwriting process of a loan.BUT THE REAL QUESTION IS HOW MUCH?One of the factors also contributing to making this way of underwriting in developing countries popular is the lack of data availability for unorganized self-employed sectors.
Imagine a roadside tea shop vendor earning almost INR 50,000 in a month but the Cash flows are a mixture of Cash, credit, online wallets and even sometimes barter.
With inadequate data to make a call, looking into the eye and with a historically low NPA to tap your back does not seem to be such a bad option after all.Emotions and Intuitions also play a very important role but the important question is what is that balance that keeps the decisions always on point.THE FLIP SIDE OF EVERYTHING I HAVE SAID TILL NOW IS: CAN YOU TRUST THE DATA 100% ?
?There is no denying the fact that 1.6 billion adults around the globe are under-banked – no checking, savings or mobile money provider accounts, no access to financial products like insurance, loans or mortgages, no protection for their money from theft or loss.
True financial inclusion would commence by bringing people out of poverty.After this brief premise, Coming back to the underwriting methods where the Banker is still looking at me with conviction as if I am too naïve to understand this and telling me more- Banker: Your Gut feel and intentions are far more important than any piece of paper proving otherwise.Me: Sir, how about applying the same to a Salaried segment than with appropriate data to dint-of the decision or the so-called (used deliberately) STP processes being designed in the new age lending processes to cut down TAT and enhance customer experience.Banker (with even more credo but a little discomfort in his eyes this time): Good if that working for some.
Not for me and my portfolio.
SPEAKING TO A NATIONAL CREDIT HEADOF A TIER 1 BANK IN INDIAMe: Sir what data touchpoints are critical for your underwriting process?Banker: I can look into the eye of the borrower and take a call if they will repay.Me (a little astonished but not showing on the face): Sir it is difficult for us to tell our systems or configure them to do that.But later I gave it a deeper thought and understood that one’s emotions and Gut feel also play an important role in the credit underwriting process of a loan.BUT THE REAL QUESTION IS HOW MUCH?One of the factors also contributing to making this way of underwriting in developing countries popular is the lack of data availability for unorganized self-employed sectors.
Imagine a roadside tea shop vendor earning almost INR 50,000 in a month but the Cash flows are a mixture of Cash, credit, online wallets and even sometimes barter.
With inadequate data to make a call, looking into the eye and with a historically low NPA to tap your back does not seem to be such a bad option after all.Emotions and Intuitions also play a very important role but the important question is what is that balance that keeps the decisions always on point.THE FLIP SIDE OF EVERYTHING I HAVE SAID TILL NOW IS: CAN YOU TRUST THE DATA 100% ?
?There is no denying the fact that 1.6 billion adults around the globe are under-banked – no checking, savings or mobile money provider accounts, no access to financial products like insurance, loans or mortgages, no protection for their money from theft or loss.
True financial inclusion would commence by bringing people out of poverty.After this brief premise, Coming back to the underwriting methods where the Banker is still looking at me with conviction as if I am too naïve to understand this and telling me more- Banker: Your Gut feel and intentions are far more important than any piece of paper proving otherwise.Me: Sir, how about applying the same to a Salaried segment than with appropriate data to dint-of the decision or the so-called (used deliberately) STP processes being designed in the new age lending processes to cut down TAT and enhance customer experience.Banker (with even more credo but a little discomfort in his eyes this time): Good if that working for some.
Not for me and my portfolio.