International Research Journal of Engineering and Technology (IRJET)
e-ISSN: 2395-0056
Volume: 11 Issue: 04 | Apr 2024
p-ISSN: 2395-0072
www.irjet.net
“A Study on Identification of Important Parameters for the Credit Scores on the Generation of Retail Loans with reference to Gujarat State” Ms. Mauli Bodiwala1, Dr. Margie Parikh2 1Research Scholar, B.K. School of Business Management, Gujarat University, Ahmedabad, Gujarat 2Professor, B.K. School of Business Management, Gujarat University, Ahmedabad, Gujarat.
-------------------------------------------------------------------------***----------------------------------------------------------------------Abstract Credit scoring is a crucial aspect of retail lending, influencing loan approval decisions, interest rates, and credit limits. Understanding the parameters that contribute to credit scores is essential for effective risk assessment and loan management. This study investigates the important parameters for credit scores in the generation of retail loans in Gujarat State, focusing on the cities of Ahmedabad, Surat, Vadodara, and Rajkot. A sample size of 110 bankers from these cities was selected using stratified random sampling, ensuring representation across various demographics. The research design employed a crosssectional approach to capture a snapshot of credit scoring perceptions and practices. Through a mixed-methods approach, including literature review, surveys, and statistical analysis, key parameters influencing credit scores were identified and analysed. The findings shed light on the nuanced factors shaping creditworthiness assessment in the retail lending landscape of Gujarat State. The study's implications extend to lenders, policymakers, and consumers, offering insights to enhance credit risk management and financial inclusion efforts. Key Words: Credit Score, Lending facility, factors for the credit lending facility, Banks, Financial institutions.
1. Introduction In today's dynamic financial landscape, retail loans play a pivotal role in fulfilling diverse consumer needs, ranging from purchasing homes and vehicles to funding education and personal expenses. At the heart of retail lending lies the assessment of creditworthiness, a process wherein financial institutions evaluate the risk associated with extending credit to individual borrowers. Central to this assessment is the concept of credit scores, numerical representations of an individual's creditworthiness derived from various financial data points. The importance of credit scores in the retail lending process cannot be overstated. They serve as key determinants in loan approval decisions, interest rate calculations, and credit limit assignments. A higher credit score typically translates to better loan terms and lower borrowing costs, whereas a lower score may result in limited access to credit or higher interest rates. Therefore, understanding the factors that influence credit scores is paramount for both lenders and borrowers alike. Despite the widespread acknowledgment of the significance of credit scores, the precise parameters that contribute to their generation remain a subject of ongoing research and debate. While traditional metrics such as income level, payment history, and debt-to-income ratio are well-established factors in credit scoring models, emerging trends and evolving consumer behaviours necessitate a deeper exploration into additional variables that may influence creditworthiness. This research paper aimed to contribute to this ongoing discourse by identifying and examining the important parameters for credit scores in the context of retail loans. Through a comprehensive analysis of existing literature, empirical data, and expert insights, this study seeks to shed light on the multifaceted nature of credit scoring and its implications for retail lending practices.
2. Literature Review (Shankar, S., 2019) mentioned that with an emphasis on the credit rating system put in place in 2000, this chapter discusses the typical funding issues that micro, small, and medium-sized companies in India confront as well as some significant steps made to solve them. Based on interviews with rating agencies and MSMEs, it analysed the scheme's benefits and drawbacks. According to the report, the government subsidies offered under the plan have played a significant role in encouraging MSMEs to obtain credit ratings, which has the effect of decreasing information asymmetry with banks and facilitating loan availability. This is because credit rating is a costly process.Making use of the information gathered from MSME lending and credit rating in the nation by building a credit risk database is essential given the substantial amount of
© 2024, IRJET
|
Impact Factor value: 8.226
|
ISO 9001:2008 Certified Journal
|
Page 2353