Quality Check & Assurance Project:

Prologue:

The main object of credit process, which inter alia includes, File Processing, Risk Checking, Verification & Credit Rating of a prospective client is to identify viz.,

a) Existence of Client

b) Intention of Client to Repay Credit Facility &

C) Ability of Client to Repay Credit Facility Extended

While, traditional processes are necessary to identify the sub prime clients or potential frauds but with expansion of credit thru various financial instruments albeit with new & improved schemes of frauds, a different approach to the entire credit process is necessary. There are many ways in which traditional method will be inadequate, below are few of the examples, which will highlight the point;

1                General Knowledge of entire credit process, starting from sourcing policy till verification, increases the risk, however few steps are taken to identify & eliminate such weakness.

2                Sub-sourcing, a menace in the Personal Loans, resulting in over exposure, multiple frauds are not effectively controlled in credit card industry.

3                With high volume, low focus on various key sourcing criteria/documents, risk assessment is never based on the sourcing policy but based on the pure percentage. Ideally, all documents, starting from KYC, till Income or Employment identification should be checked in disciplined way, which does not seem to have been happening.

4                Existing internal audit on Verification or RCU agency are done with a view to know the basic compliance, without focusing on the quality of work done.

5                Low or no attention on the actual work being done, as intermediate steps like, quality of on site verification, focus on fraud checking through third party confirmation, proper & effective Dedupe, quality check of data entry process are generally ignored or not focused.

6                Sampling for fraud check is done without considering basic law of statistics & population is arbitrarily chosen, just to have the process in place. It could be done systematically, like, Sourcing checking based on area, profession, surrogate etc. which will yield a better control on month on month sourcing pattern.

7                Various unproductivity like wrong decline due to wrong FI, non contactibility, inaccurate commitments by sales could be avoided through a proper checking/audit, which will improve the overall portfolio behavior, while saving cost to the company.

8                Seeding, cross checking & effectiveness audit as well as various other thematic checking of the entire process will substantially improve the overall quality of customer being booked.

9                Very limited focus on changing socio dynamics of city, no change in negative area/ geo limits or identification based on criteria fixed couple of years back, with a systematic process, even policy can be evaluated in predetermined period.

10             A monthly report on the major frauds, patterns of frauds, economic or financial distress reported in town vis a vis market scenario in general specific to industry as well as competition can be ascertained.

The list could be inclusive, however with a systematic approach, all the above and many more process of credit can be checked, scrutinized, controlled, tested & strengthen by introducing an overall quality & assurance practice. Though, line of demarcation between a Fraud Checking (RCU) function is very limited and at times, overlapping, however without transgressing the limits, certainly an overall assurance plan can be ascertained to address the above noted points.

Further discussion/debate with invaluable inputs from the credit perspective can be arranged so as to share the mutual understanding while arriving at common objective of entire project, much less to have everybody on same page.