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Portfolio Value Enhancement Solution

Over the last one and a half decades the absolute size and proportion of the retail finance portfolios has become progressively larger. Since the credit bureau's have become active the quality of credit has improved, however, there is substantial written off stock in the inventory of banks and finance companies.

A sizeable opportunity exists to enhance the collection efficiency while maintaining compliance with professional collection standards mandated by RBI. This will result in the value of the distressed retail portfolio improving.

Our portfolio value solution is based on extensive Retail Credit and Collections experience. It delivers a measurable increase in distressed loan portfolio value through targeted portfolio collection strategy actions.


In the first part:


  • We will assess and estimate the potential value recoverable from the portfolio and benchmark the existing collection efficiency level.
    The portfolio value is determined by doing a detailed valuation of the portfolio based on customer repayment trends. This requires the building of a portfolio model. The model provides the baseline (existing) recovery performance against which the performance improvement is tracked.
  • Collection efficiency level is analyzed via a detailed review of the existing collection strategy and it’s execution through the underlying organization and processes.
  • The combined assessment of the Portfolio Valuation (total recovery value) as well as the baseline Collections efficiency is used as an input to develop the portfolio value enhancement strategy.


The second part


  • This deals with building a portfolio value enhancement strategy. In the initial setup phase we will design a collection strategy using the information analyzed. The strategy will consist of portfolio segmentation, contact strategy, organization, capacity planning. We also will formalise the collection policy and procedures; do a gap analysis on the collection system and ensure they are upgraded to provide the requisite collection backbone.
  • Ongoing implementation support as well as course corrections based on inputs will be made.
  • In the follow up phase , we will provide the implementation support in the set up phase as well as on an ongoing basis during which the impact of the new strategy will be tracked and course corrective actions taken to achieve the targeted results.
  • MIS/dashboards will be used to track the collection strategy and to recalibrate it.

Our solution will provide

  • A parameterized portfolio assessment model- It also will provide us ongoing baseline recovery estimates.
  • Analysis of the existing collection efficiency and the impact of the changes we make.
  • Follow up implementation support to meet the stated goals.

Case Study 1

Business Challenge:Our client, a midsized Private Bank was incurring high credit losses in their Retail loan portfolio. The management was unable to predict the monthly loss run rate due to it’s volatility and ascertain which segments within the overall portfolio were likely to contribute to disproportionately higher losses. Further the Collection effort was becoming diffused and ineffective.

Our solution:
  1. A credit loss forecast model with an ability to dynamically adjust based on monthly performance. It was parameterised to deliver the monthly loss forecast based on user defined loss recognition triggers. The model also enabled measurement of the lifetime value of the portfolio.
  2. The portfolio was also segmented based on loss rates enabling management to focus collection effort on high loss potential segments.
Result:The client used the forecasting model for provision recognition and target setting for the collection unit. The collection unit in turn used the model, over time ,to drill down and isolate the high loss yielding portfolios for focusing their effort. This resulted in s significant reduction in the loss rate over time as well as improvement in the collection costs.


Case Study 2

Client Profile: Our client, a midsized Private bank, has a large Retail/SME portfolio spanning across 500 locations in India. Their portfolio delinquency level was rising. The collection process was decentralised across almost 1000 branches. The client wanted us to help them improve the non-performing asset performance by enhancing their collection capability.

Our solution: Our solution was based on a phased approach spanning over six months. The intent was to achieve quick initial improvement in the portfolio in the early stage itself and simultaneously enhance the collection capability in a phased manner.

The solution comprised of the following components:
  1. Credit loss forecasting models
  2. Collection strategy engine – consisting of the behavioural scorecard system, portfolio segmentation , contact strategy, target setting and capacity planning models and MIS dashboards
  3. Collection Organization structuring
  4. Collection Policy and Procedures
  5. Collection Infrastructure – Assessment and Enhancement
Result:Based on our solution the bank has been able to enhance their collections capability significantly leading to an improvement of the Portfolio NPA level.

Case Studies

  • Evaluation, Procurement and Implementation of a Loan Management System

    Business RequirementIndia’s leading NBFC wanted to upgrade from a legacy system to a new advanced loan management system.

  • Designing Cross-Sell strategy

    Business Requirement: Our client, a leading financial services firm, had been registering robust new account growth. Since the cross sell volume was rather low, the business wanted to focus on their large customer base for cross selling a range of financial products.

  • Creating the credit policy and portfolio health indicators

    Business Requirement: The client wanted us to review the existing portfolio dynamics, credit policy and procedures with a forward looking bias to identify issues which impact credit quality of this portfolio.

  • Ensuring profits through a robust structure

    Business Requirement: Our client, a midsized Private bank, asked us to review their Mortgage credit policy and procedures to ensure that they were robust in supporting profitable and aggressive new asset growth.

  • Identifying underlying risks

    Business Requirement: The portfolio’s credit performance is excellent; however, the mix was changing as larger ticket LAP Loans were being initiated since the yields on these loans are higher vs. those of traditional Home Loans. Accordingly, the client was concerned about any systemic risk that may be building up in this portfolio despite the very satisfactorily portfolio performance.

  • Forecasting losses aided better management and recovery

    Business Requirement: Our client, a mid-sized Private Bank was incurring high credit losses in their loan portfolio. The management was unable to predict the monthly loss run rate and ascertain which segments within the overall portfolio were likely to contribute to disproportionately higher losses.



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