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Financial Services
Usage of analytics to implement a scorecard to access the creditworthiness of a loan applicant
09 Jun 2023
Context
  • A leading Indian NBFC wanted to update and improve its scorecard used to assess the creditworthiness of a loan applicant
Approach
  • Understanding the current assessment methodology: Understood the current assessment methodology used to evaluate the creditworthiness of a loan applicant
  • Gap analysis: Identified the parameters that could be added to the existing parameters to improve upon the existing assessment parameters, and designed a scorecard comprising relevant (high-attribution) parameters alongwith the analytics team. Assigned weights to the parameters by doing regression analysis and taking inputs from industry experts
  • Automating the process of obtaining relevant data for the scorecard: Identified the parameters which could be availed by automatically filled using internal databases or third-party microservices to reduce the TAT
  • Project Management Office (PMO): PMO for end-to-end implementation along with support to the teams to ensure the timely go-live of the new scorecard
Praxis value delivered
  • Designed the model to access the creditworthiness of a loan applicant to improve the quality of the loan book
  • Reduced the TAT for loan sanction by >20% as compared to the earlier process
  • Introduced many company-first initiatives like:
    • STP underwriting for profiles meeting the target segment criteria, and where relevant data for the scorecard is available
    • Objective assessment based on a consistent, data-driven methodology
    • Clearly defined deviation approval process to ensure timely decisioning of loan applications
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