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Flexible Interest Rate Grid for Transparent Credit Approval Process - A Study Based on Customers' Perspective


Affiliations
1 Department of Commerce, Sri Krishna Arts and Science College, Coimbatore., India
     

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Indian banks are evolving with innovative methods in loan approval process, in order to retain their retail customers and to get rid of competition. One of the methods in sanctioning retail loans is based on the CIBIL's credit score. Retail customers having good credit score bargain for less interest rate. There was a lack of transparency in establishing flexible credit approval system. To enable the banker to fix transparent credit approval system with the coherence of the customers, the research was done from the customers' perspective. Responses from 328 retail loan borrowers were gathered through interview schedule. The research revealed that, a hundred point swell in credit score decreases the interest rate by 40 basic points. The research concludes that the CIBIL's credit scoring system is a tool used for price discrimination; but it could not be used as price control mechanism by the banks.

Keywords

CIBIL, Credit Score, Loan Approval Process
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  • Flexible Interest Rate Grid for Transparent Credit Approval Process - A Study Based on Customers' Perspective

Abstract Views: 338  |  PDF Views: 0

Authors

Baba Gnanakumar Perpetran
Department of Commerce, Sri Krishna Arts and Science College, Coimbatore., India

Abstract


Indian banks are evolving with innovative methods in loan approval process, in order to retain their retail customers and to get rid of competition. One of the methods in sanctioning retail loans is based on the CIBIL's credit score. Retail customers having good credit score bargain for less interest rate. There was a lack of transparency in establishing flexible credit approval system. To enable the banker to fix transparent credit approval system with the coherence of the customers, the research was done from the customers' perspective. Responses from 328 retail loan borrowers were gathered through interview schedule. The research revealed that, a hundred point swell in credit score decreases the interest rate by 40 basic points. The research concludes that the CIBIL's credit scoring system is a tool used for price discrimination; but it could not be used as price control mechanism by the banks.

Keywords


CIBIL, Credit Score, Loan Approval Process

References