Improving creditworthiness in a scientific manner

Reported by: |Updated: March 21, 2017

Arun Ramamurthy explains how Credit Sudhaar caters to the financing needs of the people who have no or low credit score

Credit Sudhaar Group is a lending and advisory platform which helps retail clients to be credit healthy and save money

Where do people with poor credit scores go to avail an urgent loan, or get a credit card so that life is comfortable in today’s less cash world? Money lenders may be an option for the borrowers and just forget about credit cards.
But the scenario is changing. Both these categories can approach Credit Sudhaar – and get a loan and get advice on how to improve the credit score and regain creditworthiness.
“We offer free credit score, credit score simulator and a wide range of analytical assessments to our customers so that they can have an in-depth understanding of their current credit health,” says Arun Ramamurthy, director, Credit Sudhaar. “We also have Credit Sudhaar Finance, which is a non-deposit taking NBFC and which offers credit products to our targeted customers, who cannot go to a bank or a financial institution because of their poor credit score,” he adds.

TWO FACTORS
He says the major causes that lead to customer defaults are, one financial illiteracy, and two emergency situations like health issues which call for unexpected expenditure. From his experience as a banker and as a professional managing stressed assets in an asset reconstruction company, he says intentional defaults were just about 6 to 7% of the total defaults.
“The 2008 crisis actually led to massive defaults in repayments and it created a set of customers who had low credit score and who did not actually know how to resolve the issue of repayments. They had good intentions, but could not approach any banks or other financial institutions because by this time credit scores have become mandatory and no institutions entertained those with low scores. So where will the go?” he asks.
Arun Ramamurthy was in fact involved in the setting up of India’s first asset reconstruction company after he left his job in a multinational bank. The entity had an NBFC license but what it did was to manage stressed assets by acquiring them from banks. “This work there actually gave me an insight into customer defaults and how a customer was actually driven to default on his repayments. At that time, credit bureaus were just taking off,” says he.

IMPROVING CREDIT SCORES
He later left this organization to launch Credit Sudhaar. “We have moulded Credit Sudhaar into one that provides clients with tools to improve their credit scores and help them manage their credit and save money. We have been a pioneer in introducing credit advisory services in India. We also offer financial products customized to match every user’s credit profile. We have customers in more than 250 cities in India,” he elaborates.
“My experience in managing stressed assets and analyzing the repayment defaults by customers have led to my firm belief that credit health and its preservation are essential components of all facets of life. Credit health also needs expert care and it needs to be protected and nurtured. And this is the philosophy that drives Credit Sudhaar. In short, we cater to a category of customers, often described as subprime borrowers,” he says.

ASSESSMENTS
“How do we protect our interests? We undertake a thorough assessment of the prospective customer. It can be through a series of psychometric tests, evaluation of their capabilities to repay, availability of collaterals and establishing their intent. We have also gained massive insights into the behavior patterns of the borrowers and these are applied to the prospective customers. We also make use of data that we have gathered through our advisory and counselling sessions to decide on the creditworthiness of the borrowers. Basis this assessment, we create a score card of our own and apply this as the yardstick for sanctioning a loan,” he says. “Having said this, we give preference to those borrowers who are part of a social group – like the JLGs in the MFI realm,” he adds.
Meanwhile the first category of borrowers is referred to banks and financial services institutions after assessments of their needs and the products best suited to them depending on their creditworthiness and credit scores. This way they can have better approval rate at the institutions they approach and even reduced interest rate.
“Yes, we do insist on guarantees,” says Arun Ramamurthy. “It can be in the form of immovable property, gold, etc. We also insist on a co-borrower – ideally a JLG – who would have equal responsibilities in payment of EMIs. What is unique that we do in offering a loan product is that the offers are customized to a customer’s credit profile.”
He adds: “What I strongly believe is every one of us should have a fair understanding of how to manage credit in a professional manner. This task is best done with experts’ help so that credit may be nurtured, enhanced and cherished for a lifetime. Our advisory business has around 10,000 customers.

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