Selvarasu a evolution of grounded theories for credit rating

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Evolution of Grounded Theory for Credit Rating

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Selvarasu a evolution of grounded theories for credit rating

  1. 1. WELCOME EVOLUTION OF GROUNDED THEORY FOR CREDIT SCORING, INDIA
  2. 2. BY MUTHARASU A SELVARASU Professor, Department of Business Administration, Annamalai University & RAIS AHMAD ITOO Doctoral Research Scholar, Department of Business Administration, Annamalai University
  3. 3. INTRODUCTION •Lending and Borrowing •Credit Evaluation •Credit Decisions •Banking in service sector
  4. 4. REVIEW OF LITERATURE •Grounded Theory: Grounded theory, a research methodology primarily associated with qualitative research, was first proposed by Barney Glaser and Anselm Strauss in 1967. According to its founders, grounded theory constitutes an innovative methodology, facilitating ‘the discovery of theory from data’ (Glaser & Strauss, 1967). •Credit Scoring And Credit Scoring Models: Credit scoring is a group of decision models and their under-lying techniques which give support to lenders when providing credit to customers (Heiat, 2012). In addition, credit scoring model is a decision support system that helps the managers in financial decision-making process.
  5. 5. RESEARCH METHODOLOGY •Research Problem •Research Objectives •Population Sampling and Data Collection •Pre-test •Methods of Data Collection •Validity and Reliability •Limitations of the Study
  6. 6. RESEARCH PROBLEM
  7. 7. RESEARCH OBJECTIVES
  8. 8. POPULATION, SAMPLING AND DATA COLLECTION 47Public Banks 21, PrivateBanks 18and Foreign banks 8. Theoretical sampling.
  9. 9. PRE-TEST Interviewing 6 Banking Officials 2 State Bank of India  1 City Union Bank 1 HDFC  1 ICICI 1 Punjab National Bank
  10. 10. METHODS OF DATA COLLECTION 25 respondents from public sector banks, 17 respondents from private sector banks and 5 respondents from foreign banks dealing with scoring of personal finance application and preparation of credit report. Each interview last for 30-45 minutes. Before starting an interview, participants were asked to clarify doubts about study, if any. Secondary data sources used for this study are; 529 commercial bank customer responses from big data; 79 images related to credit scoring models and CIBIL; 65 CIBIL newspaper articles; 102 news articles (19 bank loan, 22 credit scores, 10 loans, 10 home loan, 16 RBI and loans, 25 loan defaulters) and 59 interview videos given by credit bureaus employees.
  11. 11. VALIDITY AND RELIABILITY To ensure validity, following five interrelated procedures were followed (a) Respondent Validation, (b) Refutability, (c) Constant Comparison, (d) Comprehensive Data Treatment, and (e) Deviant Case Analysis. Proportional reduction in loss method was used to assess the reliability of coding scheme. The proportional reduction in loss for this study is 0.81, which is well above the 0.70 cut-off level recommended for exploratory research
  12. 12. USE OF NVIVO AS DATA ANALYSIS TOOL
  13. 13. DATA ANALYSIS AND CODING Open Coding(Free Nodes): Initially researcher found 238 free nodes from the data sources. Axial Coding (Tree Nodes): 22 categories Application-information, motivation for repayment, extra benefits, standard bank charge, Imposed bank charges, screening eligibility,  clearing norms, loan processing, demographic details, employment details, financial details, loan details, behavioural details, collateral details, disbursement, positive experience and negative experience, Credit agencies, credit scoring, credit scoring methods, credit reporting and credit report errors.
  14. 14. Evolved Theories 1. Loan Information Searching Theory 2. Loan Repayment Theory 3. Theory of Loan Pricing 4. Theory of Selecting Loan Applicant 5. Loan Service Processing
  15. 15. Evolved Theories 1. Theory of Rating Credit Score 2. Loan Lending Theory 3. Theory of Customer Loan Experience 4. Credit Agency Theory 5. Generating Report and Reliability Theory
  16. 16. THEORY FOUNDATION- CASE1: PUBLIC SECTOR BANKS PUBLIC SECTOR BANK BORROWER'S EXPERIENCING PERSONAL FINANCE Application- Information Motivation for Repayment Standard Bank Charges Screening Eligibility Clearing Norms Loan Processing Demographical Details Employment Details Financial Details Loan Details Behavioural Details Collateral Details Disbursement Positive Experience Negative Experience
  17. 17. THEORY FOUNDATION- CASE2: PRIVATE SECTOR BANKS PRIVATE SECTOR BANK BORROWER'S EXPERIENCING PERSONAL FINANCE Application- Information Motivation for Repayment Extra Benefits Standard Bank Charges Imposed Bank Charges Screening Eligibility Clearing Norms Loan Processing Demographical Details Employment Details Financial Details Loan Details Behavioural Details Collateral Details Disbursement Positive Experience Negative Experience
  18. 18. THEORY FOUNDATION- CASE3: FOREIGN BANKS FOREIGN BANK BORROWER'S EXPERIENCING PERSONAL FINANCE Application- Information Motivation for Repayment Standard Bank Charges Screening Eligibility Loan Processing Demographical Details Employment Details Financial Details Loan Details Behavioural Details Collateral Details Disbursement Positive Experience Negative Experience
  19. 19. THEORY FOUNDATION- CASE4: CREDIT BUREAUS CREDIT SCORING BY CREDIT BUREAU Credit Rating Agencies Credit Scoring Credit Reporting Credit Report Error Credit Scoring Methods
  20. 20. SUGGESTIONS Customers should be made aware about Third Part Agencies Commercial Banks should take care about customer support services, hidden charges, transparent and hassle free process and detailed information to customers.
  21. 21. CONCLUSION Internal credit scoring is either done using loan originating software or using rating sheets. External credit scores tell about the behaviour of the applicant, e.g. payment history, dues, current loans, loan amount etc. From CIBIL, Equifax, Experian and High Mark Affect credit score; credit mix, defaults reported, utilization of credit, over dues, payment history, guarantor, late payment, loan behaviour, credit card repayment, credit limit etc. Impact on customer satisfaction are; customer support, service, follow ups, response, processing, transparency, hassle free process, reliability, detailed information.
  22. 22. LIMITATIONS OF THE STUDY Many of the bank employees couldn’t cooperate, because of their busy schedule and data confidentiality policies of the banks. In order to theorize similar results, also samples could have been taken from other metro cities.
  23. 23. THANK YOU

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