Enabling one of the largest private sector banks in India achieve regulatory and growth targets in a fast-changing market.
Context
One of the largest private sector banks in the country, this client is consolidating its position as a market leader in retail finance. In doing so, Dhurin has been supporting it in achieving its regulatory goals while at the same time helping identify pockets of growth that can be easily achieved with combining empirical decision-making with a deep-rooted understanding of customer behavior.
Challenge:
Dhurin is supporting this journey at multiple levels.
1. Support for external audits and regulatory submissions
2. Periodic estimation of PD, LTPD, and LGD for 20+ secured and unsecured retail portfolios.
3. Enable greater data-driven decision-making to help expand the customer base without additional risk or cost, by means of pre-approved offers and greater automation in processing loan applications.
Exhibit 1
As part of the preparation for annual CECL regulatory submissions, the bank needs to ensure that its risk parameter estimation process and outputs can stand close scrutiny at the hands of auditors and regulators. Dhurin worked with the bank’s Risk Analytics Group and made recommendations relating to document enhancement, plugging operational gaps in codes and processes, and improvements to the risk parameter estimation methodology, across 10+ retail finance portfolios. In addition, a robust maker-checker process ensured error-free estimation of PD, LTPD, and LGD for 20+ secured and unsecured retail portfolios, which serve as inputs into expected loss calculations.
Findings and Recommendations
Validation Approach
Exhibit 2
In line with the bank’s evolving customer-acquisition strategy, Dhurin worked to conduct a deep-dive analysis into the number and size of pre-approved offers being rolled out by the bank sliced by zone, region, state, and pin codes, with a view to quantify and enhance the share of pre-approved loans in overall disbursement. The analysis was also referred to by regional and zonal business heads to spot major reasons for some customers not receiving pre-approved loan offers, and how the same could be rectified.
Exhibit 3
The existing two-wheeler loan approval strategy at the bank relied heavily on a bureau-provided score which was not only expensive but also not geared towards maximizing automated decision-making while keeping a check on portfolio risk. Dhurin worked with the product team to test and establish the acceptability of an internally developed generic score in place of the bureau score solution for loan application decisioning. The Dhurin team went on to establish a new approval strategy for the portfolio covering thick-file, thin-file, and new-to-credit customer segments with the aim of minimizing manual intervention and reducing decision times. In all, the new strategy is expected to bring significant cost savings to the bank, while reducing documentation requirements and loan processing time, thereby enhancing customer satisfaction.
Portfolio Distribution
Proposed Strategy Overview
The results
In all, the new strategy is expected to bring significant cost savings to the bank, while reducing documentation requirements and loan processing time, thereby enhancing customer satisfaction. The measurement is underway and we will be able to share some highlights soon.
