Challenging economic times dictate that banks need to seek radical ways to transform their operations. This is particularly true in lending operations, where opportunities exist to remove wasteful and redundant paper processing to improve customer service and reduce cost. Customer expectations from Banks is also rising; customers expect superior customer experience by getting banking services at a time and place of his choice.
Banking customers in India are presented with myriad options for sources of credit. This is seen across the spectrum in metros, urban and rural areas across retail, SMEs and corporates as well. The need for credit spans diverse requirements from consumer products (customer wants instant credit decisions) whereas SMEs and corporates would want their bank to understand their business and provide credit as and when needed. Collaterals for credit in various forms adds to the complexity of the credit business case for banks.
On the other hand, prudential norms from regulatory authorities on Income Recognition, Asset Classification and Provisioning pertaining to advances continue to evolve and banks need to be agile to adequately respond to these growing needs.
Given the diverse needs from varied customer segments and an unmet demand for credit facilities, banks are in a unique position to fulfill these needs while ensuring that the risk & compliance requirements are met to the satisfaction of the respective boards and the regulatory authorities.
Effective loan lifecycle management
Today, most customers request for a loan in a bank branch by providing KYC/ EKYC and other documents in support of the loan application. While this mode ensures compliance with the bank’s norms, it is somewhat restrictive in today’s world, where the customer is more informed about credit processes and more importantly, the competition. For example, the customer expects origination and servicing via alternate delivery channels like internet and mobile or fees / charges that are based on the banking relationship. The current generation of youth and new-age businessmen are quite tech-savvy and credit servicing on the mobile would be a key differentiator for any bank.
The credit request and fulfillment process follows a series of well-established steps that are aligned with the credit policies in the Bank. These are:
Business Development: Solutions and strategies that drive lending leads and customer interaction in an omnichannel model that covers the branch, internet, mobile, agent and call center.
Credit Application: Channels and methods that allow acceptance of applications and associated collateral for processing and provide status updates to applicant.
Credit Review: Tools that allow banks to establish criteria which allows evaluation of an application against credit policy. This should provide auto approval or denial plus manual review with conditions for underwriters, legal teams and appraisers.
Fulfillment: Validation of state and central compliance, production of compliant documents, lien marking, e-signing, and seamless movement of the loan to servicing would be achieved in this stage. Banks can gain competitive advantage by guiding the customer through the origination process till fulfillment by deploying technology.
Servicing: Capabilities to service loans throughout their lifetime including core processing, fees & charges, accounting, delinquency management and ongoing payment/advance management. Seamless connectivity into the national payments networks like IDRBT for RTGS/NEFT, NACH and Cheque Clearing or connectivity with Sponsor Banks would add value.
Portfolio Management: Services that allow the Banks to review the loan portfolio for regulatory compliance, examination expectations, loan and borrower health, audit, exception management, limits/collateral management and aggregate metrics like Net Interest Margins, Net Interest Income would be an integral part of the technology setup.
Banks seeking a larger share of the credit market can position themselves in an advantageous position by offering tailored processes for different customer segments and credit products from loan application till servicing, by enabling decision making with due controls as per the credit policies of the Bank. From a technology perspective, banks need to actively consider mobility loan solutions that seamlessly integrate with a loan origination system and loan management systems.
FIS has implemented the paperless lending approach in multiple banks in India for customer and account origination. FIS has successfully helped these organizations in their paperless journey by enabling integration with Aadhar for EKYC, CKYC for centralized customer registration across banks, Central Registry of Securitization Asset Reconstruction and Security Interest (CERSAI), various credit bureaus like CIBIL, HiMark, Trans Union, etc. Banking regulations in force today coupled with policies require wet signatures, document originals to be lodged with the bank as part of collateral, among others. These require policy level changes, and there is a lot more that can be done by Banks within the ambit of the policy mandates.
Technology as an enabler for efficient lending processes
A tremendous opportunity exists for Banks to take advantage of mobility, loan origination, document imaging and workflow technology in conjunction with various government managed registries. By enabling electronic capture at the initial entry into their institution, banks can begin to realize the vision of an entirely paper-free lending operation. This vision enables the elimination of redundant workflows, the reduction of paper/courier costs and reduction of errors created from manual processes. The banking industry, as whole, has made great progress imaging specific documents and pieces of paper. The goal now becomes increasing efficiencies and enhancing the customer experience across the entire lending process.