In the wake of growing stressed assets in the Indian banks, it has become utmost important that the banks start collecting the market intelligence about the borrowers. Market intelligence in the crude terms is the unstructured information available about the borrowers from different sources.Market intelligence is the external information relevant to a borrower and his associations with the heightened risk entities such as Politicians, Bureaucrats, Terrorists etc. Bankers need this information specifically for the purpose of accurate and confident decision-making in determining strategy to deal with the borrowers if they can not completely avoid lending them.
Importance of Market Intelligence
Market intelligence allows a bank to estimate the magnitude of possible risks associated with the borrower and is also valuable in understanding the intentions of the potential borrowers. In-spite of having the regulatory requirements, banks are found to be hesitant about gathering the market intelligence because there are no evidences available for the information to substantiate. Historical analysis of some of the failures of borrowers reveals that the inner circle of the business knows different aspects of information.
Types of Intelligence
There are four different types of intelligence available about the borrowers.
- Human Intelligence – Typically this information is gathered from the human sources which range from employee working with the borrower company to competitor of the borrower, from sector analyst to another bank employee who is already associated with the target as the banker.
- Technology Intelligence – Technology intelligence has emerged beyond the google searches or desktop searches. The companies like Riskpro, which offer the intelligence as service, identify the borrowers as heightened risk individuals based on various different risk parameters offer the information on the borrowers.
- Raw Intelligence – In many cases the information gathered about the borrowers is required to be corroborated with the financial or other information available with the bank.
- Actionable Intelligence – Actionable intelligence is information that can be followed up on, with the further implication that a strategic plan should be undertaken to make positive use of the information gathered. Riskpro, which offers the intelligence as service, offers the intelligence reports on the basis of regulatory actions, it gives useful insights about the borrowers and also about the bank such as which are the borrowers associated with the actions taken by Central Bureau of Investigation in every branch.
When to collect Market Intelligence ?
Market intelligence plays a vital role which is necessary for the banks to take effective decisions in the wake of growing willful defaults. Bankers need to collect the Market Intelligence at three different stages.
- When the bankers are planning to disburse the loans – this type of the market intelligence is also termed as preventive market intelligence
- When the accounts are found to be red flagged – As per the regulations, when the account is classified as the Red flagged, then the banks need to understand how long the borrower can sustain in the adverse situations. In the cases such as arrests of promoters or income tax raids the market intelligence techniques used are different.
- When the account has been classified as the wilful defaulter – Banks need better permanent diagnostics to get to the bottom of willful defaults. This can happen though (a) market intelligence; (b) funds flow analysis; and (c) financial analysis. However, this market intelligence is purely used to understand what might have gone wrong with the borrower.
Pre-defined Intelligence Reports
Regtech Companies play a vital role in designing different reports related to the regulations. Here are some reports which help the bankers to understand the insights into the borrowers associated with their bank from external sources. One such company is Riskpro, which offers Intelligence-as-service.
- Investigative Intelligence Report – India’s investigative agencies have become aggressive and have investigated numerous borrowers of Indian banks. These reports provide insights about these investigative actions
- Enforcement Action Report – Enforcement Agencies are going behind the borrowers and in some cases are seizing the assets. This may impact the security offered to the bank. This is an external intelligence gathered on the borrowers of the bank.
- Enhanced Due Diligence Reports – Reserve Bank of India vide its Master Direction DBR.AML.BC.No.81/14.01.001/2015-16 have asked the Regulated entities to perform extended due diligence over the Politically Exposed Persons. Riskpro, which is one of the leading compiler of the information associated with politico-businesses provide specific reports on the Individual politician and its influence on various businesses.
- Auditor Interest Reports – Audit firms and their partners play a vital role in lending decisions as the watchdogs of the financial system. It is important to understand their interests in other companies when they are in practice.
These are some of the commonly used market intelligence reports which help the banks to gain insights.