Credit appraisal of a loan denotes evaluation of proposal as per the guidelines of the regulator and internal policies of the Financial Institution. Be it a Bank or NBFC both will follow the process of Credit Appraisal so as to take an informed decision on the loan application.
Although it comprises of various steps which includes KYCs at an initial go followed by understanding of the financials in case of Corporate Finance and Income Statement in case of Individual Finance. But these days majority of the credit analyst would focus on the future projections of the applicant rather than the historical standings of the applicant.
Hence this has given birth to the concept of Bank Statement Analysis. The term is seasoned on papers but till few years back only Prima Facie understanding of the statement was considered but the recent trends of increase in NPA level have generated a need of a more stringent framework of credit underwriting. Today analyst do not prefer sanctioning of the proposal without understanding the repayment capacity of the applicant based on the cash flow instead of income proofs. In simple words you may be earning an amount which makes you eligible for a certain amount of loan but your sanctioning is always subject to your transactional behavior which is understood by performing a detailed analysis of the Bank Account Statement of the applicant.
Bank Statement Analysis is now a term which is gaining momentum in the Fintech space and a lot of brainstorming is being put to develop an automated software to perform this analysis. ScoreMe’s Bank Statement Analyzer helps any lender to understand the transactional history of the applicant and also classifies each of the transaction into a mode/purpose of transaction for better understanding. The software also highlights certain red flags which alerts the credit analyst to take an informed decision on the applicant e.g. Cheque returns in the past, Delay in Interest Payments, Irregular payment of EMIs etc. It also performs a detailed Cash Flow Analysis by taking into consideration the Inflows, Outflows, Indirect Expenses, Direct Expenses, Payables & Receivables.
Therefore, you would see an increase in the induction of such software in the modern-day credit underwriting.