The credit underwriting process is crucial in ensuring that loans are extended to borrowers who are both creditworthy and low-risk. This process helps financial institutions evaluate the risk associated with a borrower before granting a loan, ensuring a balance between profit and risk management.

Key Insights from the Credit Underwriting Process

1. Shift in Financial Behavior:
   India’s savings rate has dropped significantly in recent years, leading to increased reliance on credit to fuel household consumption. This shift is particularly evident as borrowings now stand at 5.8% of the GDP. As credit becomes an integral part of daily life, the ability of lenders to underwrite efficiently becomes more critical than ever.
2. Challenges in Building Loyal Borrowers:
   While increasing the number of borrowers (credit widening) is often a goal, long-term success depends on building a high-quality retention cohort, a strategy known as credit deepening. This requires lenders to focus not only on customer acquisition but also on ensuring borrowers repay loans and return for future borrowing needs.
3. Steps in the Credit Underwriting Process:
   The underwriting process consists of several steps:

• Onboarding: Collecting relevant data points from potential borrowers.
• Evaluation: Using various data sources, including traditional credit scores and alternative data points (employment, tax filings, professional credentials).
• Decision: Granting loans based on risk assessments and further verification.

1. Data Sources for Credit Underwriting:
   To accurately assess a borrower, lenders rely on a wide range of data sources, including:

• Income Tax Returns (ITR) and tax filing status.
• Employment details from sources like EPFO and professional verifications.
• Vehicle and professional details for self-employed individuals.
• Official documents, such as PAN and Aadhaar for individuals, GST, and Udyam for businesses.

1. The Role of Technology in Expanding Credit:
   Digital verification tools are essential in widening the borrower base, especially in markets like India where a large segment remains underserved by formal banking. Tools like UPI handle validation, employment verification, and professional credentials play a key role in minimizing fraud, reducing costs, and speeding up the approval process.

Enhancing Loan Book Quality Through Better Insights

In today’s fast-paced lending environment, improving underwriting processes is key to enhancing the quality of a lender’s loan book. By leveraging rich data sets and integrating them into the underwriting process, lenders can make more informed decisions. This not only helps reduce risks but also fosters a better understanding of customer behavior, allowing lenders to build stronger and more loyal borrower relationships.

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How Intelegit Can Help You

At Intelegit, we specialize in providing custom-built solutions tailored to your specific underwriting needs. Our powerful APIs and dashboards allow lenders to integrate advanced verification tools that streamline the onboarding process, reduce fraud, and improve loan quality. Whether it’s employment verification, credit scoring, or alternative data aggregation, Intelegit can help you build a robust credit evaluation system that scales with your business.

If you’re looking for a customized solution or need expert advice on how to optimize your underwriting process, contact us today! We’re here to help you make better lending decisions faster and more efficiently.