Just about five years back, the borrower had to go through the long process of applying loan, submitting income and KYC documents and then wait for the decision to be communicated on the loan application. It took anything from 7 to 15 days to get the decision from underwriting desk. And then this was followed by another few days for the loan to actually get disbursed and proceeds reflecting in the account for use. But things have completely changed now and today it takes only a few minutes to actually get the decision and a few more hours to get money credited to account. This has been possible for the loan processing using technology in screening and deciding the applications.
Let us understand as to how this works. But before that, please note that whole process is today segmented into four steps and each of the steps continues to get minutely analyzed for even further improvement of process.
Step 1 : Application
Let us assume that you apply for a car loan. Unlike in past where you were required to fill up a physical form, all you need to do is visit the bank’s website and apply for the loan. The form that carries basic details like your name, address, PAN, adhaar number, employment status, income etc. Apart from this the lending institution will ask you to provide for one time access to your bank statement. And these basic details will help the bank obtain your credit bureau report and have access to the banking transaction history for a specific period. Generally it is less than a year. Some banks may just seek last 6 month’s statement. With direct access to bureaus and the tie ups with banks, the report and transaction history is available simultaneously.
Step 2 : Assessment
As soon as the data is received by the bank, it runs various algorithms in the background. The data is structured in a particular format and checks run on it. Say for example, the bank decides to extend a particular loan product with a credit score cut off of 730, all the applicants with a lower score will automatically get rejected. The assessment of application happens in jiffy taking into consideration the data points like income, cheque bounces, average balances, kind of transactions etc from the available bank statement and the bureau data which gives complete history of all the loans and other credit facilities taken by you along with their repayment patterns and current status. If any default is detected then again the application stands rejected.
Step 3 : Validation
As soon as the borrower is deemed to be prospective, the validations run in the background. The PAN gets verified, the Adhaar number along with details like date of birth and address also gets verified. The online access to these two important documents and their validation has cut down on the process of verification from a few days to a few moments. Not only these, but even other documents like passport, electricity bills, PF accounts etc get validated on the go.
Step 4 : Disbursal
In older times (while it is not so old) the borrower was to provide with security cheques, the ECS mandate was to be stamped and signed by the borrower’s bank along with the physical signatures on the loan agreement. However, this has completely changed today. All that the borrower is required to do is sign the loan agreement and ENACH through the OTP bases Adhaar signature. The documents are sent online through a link and once the link is accessed it gets connected with UIADI for authenticated signature. The person receives a OTP that needs to be provided to complete the online signature process. Similarly rather than giving physical cheques as security or ECS form for debit mandate, the ENACH gets signed through similar process. The banks have been able to implement this not just because of ease but also for the reason that any NACH bounce is as liable in court of law as a cheque or ECS would have been.
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