Heckyl Early Warning System – Mitigate Risk, Safeguard Bank Asset Quality

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red-flagsIndian banks tend to take on more risks during an upturn in credit growth while non-performing loans (NPLs) of private banks are more reactive to changes in interest rates, according to the recent RBI working paper. The report highlighted a one percent increase in loan growth leads to a 4.3 percent rise in NPLs over total advances (NPL ratio) in the long run.

Post demonetization of higher currency notes, banks have received whopping Rs 12.4 lakh crore in cash deposits. Some portion of these cash deposits is expected to remain with banks, which will improve liquidity in the system. It will enable banks to ease interest rates and boost lending operations.

However, any attempt to accelerate lending activities without adequate credit assessment of borrowers could deteriorate asset quality further, as highlighted by the RBI working paper. Therefore, it is important for banks to strengthen their credit assessment and risk monitoring process.

Heckyl has developed Risk Analytics Platform (RAP), which banks can deploy on top of their existing risk models to improve overall asset quality. The platform is an ‘Early Warning System’ that empowers the credit and risk teams with intelligent insights on companies in real-time. It essentially acts as an indicator of pre-default behaviour of companies through deep-dive analytics, by virtue of which any negative buzz around the company will be highlighted as an alert.

Some of the news red flags identified by our system highlighted in below image:news-red-flags

Banks, too, have internal data that can be used extensively to reveal industry trends and business patterns. Therefore, the engine leverages on the internal data at banks and combines it with analytics from social media data, Registrar of Companies (ROC) data, open data sets, litigation data, pro-cyclicality and global economic indicators to enable a comprehensive real-time risk monitoring methodology. (Read more on our Early Warning System in previous blogs – Rolta: How could lenders have spotted impending default? and Credit Risk… De-Risked! )

Below image highlights some of the fundamental red flags identified by our system:fundamental-red-flags

Heckyl’s innovative Credit Risk Early Warning System can provide qualitative and quantitative analysis from structured and unstructured data in real-time. It will not only help banks be vigilant on a particular borrower, but also help decide whether to sanction/ increase or decrease the credit limit to a certain borrower. Early Warning System is the need of the hour for bankers to build, manage and sustain a healthy and profitable commercial loan portfolio.

To know more about Risk Analytics Platform, email us at info@heckyl.com.

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