Pa­per­less lend­ing

Banking Frontiers - - Highlights - Anirudh Raghaven­dra, Di­rec­tor, Fi­nan­cial Ser­vices, FIS

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.

Anirudh Raghaven­dra

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.