Transforming corporate lending in India

Corporate lending is one of the most vital segments for banks, forming a substantial part of their asset base and revenue generation. In India, the corporate lending sector has been a key driver for banking growth, contributing significantly to economic progress.

Corporate lending has been a cornerstone of the banking industry for decades. It involves financing large businesses that require significant capital to expand operations, manage short-term cash flow issues, or invest in new projects. These loans often have extended terms and higher ticket sizes, making them lucrative for banks.

Moreover, corporate loans are typically secured with valuable collateral, reducing the bank's risk while increasing the profitability of the relationship. Banks also build long-term partnerships with corporate clients, offering an entire suite of financial services such as treasury management, forex services, and trade finance, which create additional income streams.

For banks in India, corporate lending is particularly crucial. According to the Reserve Bank of India (RBI), corporate loans constitute nearly 40% of total bank credit. This figure underscores the importance of corporate lending in driving banking profits and overall economic growth. The demand for infrastructure financing is expected to add to corporate credit growth, with India planning to spend over $1.5 trillion on infrastructure by 2025. Also, the increasing need for working capital and short-term financing by SMEs and large enterprises is anticipated to drive corporate loan demand, with corporate credit growing by 10-12% annually over the next few years, according to CRISIL, making it an even more critical segment for banks to capitalize on.

This consistent growth offers banks immense opportunities. However, it also presents a unique set of challenges in the areas of credit assessment, approval times, and regulatory compliance. Despite the profitability and growth potential of corporate lending, the segment is fraught with challenges that banks need to navigate carefully:

• Complexity in Credit Assessment Evaluating the creditworthiness of large corporations requires deep due diligence, which involves analysing financial statements, projections, sectoral performance, and more. Manual assessments can be time-consuming and prone to errors.

• Extended Approval Time Corporate loans often take longer to approve due to the scale of due diligence, legal checks, and credit evaluations. This delay can frustrate corporate clients and may lead to missed opportunities.

• Regulatory Compliance Banks are required to meet stringent regulatory norms, especially in terms of Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements. Failing to comply can result in penalties or legal consequences.

• Risk Management Large-scale loans come with greater exposure to risks such as sectoral downturns, corporate defaults, or even fraud. Managing these risks effectively is critical for ensuring bank profitability.

These challenges highlight the need for digital transformation in corporate lending, where traditional methods often fall short. A comprehensive Loan Origination System (LOS) like Origin from Celusion,  can help banks streamline processes, improve risk management, and enhance compliance.

With a paperless system accessible via web and mobile, customers can enjoy a seamless experience, speeding up the loan sourcing and feedback cycle. Origin offers omni-channel sourcing, allowing banks to manage various channels like field sales, tele-sales, or DIY portals under one system. Smart forms automatically populate data using OCR and regulatory databases, ensuring accuracy and efficiency. Real-time updates notify customers about their application status and any additional information requests.

Verification checks, including KYC and AML, are streamlined digitally, reducing costs and improving processing speed. Online verifications allow banks to retrieve credit scores, authenticate documents like PAN and Aadhaar, and verify bank accounts through APIs. Even physical verifications, such as legal and fraud checks, are efficiently managed via an online portal.

Origin also enables faster credit decisions, with rule and decision engines ensuring the right product fit and optimal risk assessment, all while maintaining alignment with credit approval policies through workflow engines.

Corporate lending is a critical component of the Indian banking sector, offering significant revenue opportunities but also presenting complex challenges. With the help of a robust LOS solution like n Origin, banks can overcome these challenges, streamline their lending processes, and ultimately, capitalize on the growing demand for corporate credit.