International Journal of Marketing and Business Communication

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

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
     

   Subscribe/Renew Journal


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
Subscription Login to verify subscription
User
Notifications
Font Size


  • Bhide, P. (2001). Emerging Challenges in Indian Banking. Retrieved July 25, 2011 from Munich Personal RePEc Archive: http://mpra.ub.uni-muenchen.de/1711

  • Capon, N. (1982). Credit Scoring System: A Critical Analysis. The Journal of Marketing, pp. 82 - 91. Competition Commission of India Report, June 7, 2011.

  • Cutts, C. & Green, A. (2004). Innovative Servicing Technology: Smart Enough to Keep People in Their Houses? Building Assets, Building Credit: A Symposium on Improving Financial Services in Low- Income Communities, (pp. 2 - 36). Washington DC:Freddie Mac Working Paper

  • Gregory, E. E. C. (2007). The Impact of Credit Counseling on Subsequent Borrower Behavior. The Journal of Consumer Affairs, 41(1), pp. 28.

  • Guszcza, J. (2003). Does Credit Score Really Explain Insurance Losses? Multivariate Analysis from a Data Mining Point of View. CAS Winter Forum, pp. 113 - 138.

  • Kochar, A. (1997). An Emperical Investigation of Tationing Constraints in Rural Credit Markets in India. Journal of Development Economics, pp. 339 - 371.

  • Kossmann, D. C. (2003). Credit Scoring: Is It Right for Your Bank? London: Bannock Consulting.

  • Lyons, A. R. (2007). What's in a Score? Differences in Consumers' Credit Knowledge Using OLS and Quantile Regressions. (p. 36). University of Illinois Urbana: Network Finance Institute.

  • Pati, A. (2010). Corporate Governance in Banks of India. In F. K. Alexander Kostyuk, Anti-Crisis Paradigms of Corporate Governance in Banks - A New Institutional Outlook, (pp. 333 - 347). Ukrine: Virtus Interpress.

  • Ramasundaram, G. S. M. (2009). Customers of Retail Banking Industry in India - A Demographic Segmentation. Vistas, pp. 9 - 21.

  • Satchidanand, D. S. & Panikar, R. (2006). Credit Rating Model for Rural Borrowers. CBIT Centre of Banking and Information Technology, International Institute of Information Technology, (pp. 2 - 9). Bangalore: CBITIIITB.


Abstract Views: 286

PDF Views: 0




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

Abstract Views: 286  |  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