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Banking f1

The document analyzes loan defaults, revealing a high default rate of 47.87% among active loans, particularly in personal and MSME loans. Key risk factors include credit score, income stability, and loan type, with self-employed borrowers showing the highest default rates. Recommendations include stricter credit screening, focusing on income stability, and implementing risk-based pricing to mitigate risks in lending.

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Hardik kaushik
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6 views12 pages

Banking f1

The document analyzes loan defaults, revealing a high default rate of 47.87% among active loans, particularly in personal and MSME loans. Key risk factors include credit score, income stability, and loan type, with self-employed borrowers showing the highest default rates. Recommendations include stricter credit screening, focusing on income stability, and implementing risk-based pricing to mitigate risks in lending.

Uploaded by

Hardik kaushik
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Bank Loan Default Analys

Analyzing Key Insights & Risk Factors in Lending

SUBMITTED BY – SUBMITTED TO –
HARDIK KAUSHIK PROF. RACHNA KATHURIA
24502
Introduction
• Overview of the study on loan defaults
• Objective: Identify patterns and risks in loan disbursement
Clean list of factors banks check for loan default risk

1.Credit Score & Credit History


2.Income & Employment Stability
3.Debt-to-Income (DTI) Ratio
4.Loan Purpose
5.Collateral or Security
6.Age & Profile of Borrower
7.Existing Liabilities
8.Banking Behavior
9.Type of Employment
10.Loan Amount Requested
Summary of Data
Total Loans Disbursed: ₹229M

Average Interest Rate: 11.47%

Average Credit Score of 599


Borrowers:

Total Active Loans: 94

Defaults Rate: 47.87%

Total Defaults: 45
Loan Default Trends
• Highest Default Rate: Personal Loans
• Moderate Defaults: Auto & MSME Loans
• Lowest Defaults: Home Loans (likely due to collateral)
• Key Observation: Risk is higher in unsecured loans
Default Rate by
Employment Type
• Self-Employed: 36.17% (Highest default rate)
• Business Owners: 30.85%
• Salaried Individuals: 32.9% (Lower risk)
• Conclusion: Income stability plays a role in loan repayment
Loan Amount vs.
Credit Score
Scatter plot analysis shows no strong correlation. Large loans
are being issued across all credit scores, leading to higher risk
exposure.
Impact of Interest Rate on Defaults
Default rates remain high even at lower interest rates. Interest rate alone does not determine default
probability. Other factors (borrower risk, loan type) must be considered.
Key Takeaways
• ✅ High Default Rate – 47.87% of active loans are in default, indicating significant credit risk
• ✅ Personal & MSME Loans at Risk – Highest default rates; home loans are safer due to collateral
• ✅ Self-Employed Borrowers Default More – Income stability plays a key role in repayment behavior
• ✅ Weak Credit Score-Based Lending – Loans are issued across all credit scores, increasing risk
• ✅ Interest Rate Alone Doesn’t Prevent Defaults – Defaults occur at both high and low interest rates
• ✅ Need for Stronger Credit Policies – Stricter screening, risk-based pricing, and better monitoring required
Recommendations
• 📌 Implement stricter credit screening for personal and MSME
loans
• 📌 Focus on income stability while approving loans
• 📌 Introduce risk-based pricing for high-risk borrowers
• 📌 Strengthen loan monitoring and early warning systems
Conclusion
• Recap of key insights
• Importance of risk-based lending policies
• Future steps for improving credit assessment

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