Automated tools must-haves for Indian banks to limit credit risks

CHENNAI, INDIA: Banks mostly rely on internal data to monitor the borrower health that might cause trouble in the future. The absence or minimal use of external data (from an availability and quality point of view) doesn’t help in taking sound decisions also.

For over 75% of the banks in India, report generation, dissemination and follow up actions is either fully manual or just partially automated. With regard to reporting, data collection is also fully manual for 40% of the responding banks, reveals a study on ‘Credit Monitoring Practices of Indian Banks’ by Bahwan CyberTek.

The survey was conducted between October 2016 and February 2017, amongst senior bankers spearheading the credit risk monitoring or are part of the management unit, spread across 25+ public and private sector banks in India of varying asset sizes.

The study highlights the need to take a holistic approach to credit monitoring with organizational ownership combined with an urgent need for automation as well as data integration.

The study reveals that no bank has completely automated the SMA (Special Mention Accounts) monitoring process also.

Jaya Vaidhyanathan, President – BFSI & Strategic Business Initiatives, Bahwan CyberTek said, “As a key priority for 2017 and years to come, we think it is important for Indian banks to make full use of the technology which will help automate and therefore improve their credit monitoring techniques, given that the health of our country’s economy depends on it.

“This therefore brings about the need for an Early Warning System where bankers can predict and assess the health of a borrower, for instance, and take necessary measures," added she.  In fact, majority of the responding banks (more than 70%) see a need for a separate Early Warning System rather than making modifications to the existing systems, and have planned for one also.