Identifying critical parameters for determining credit rating of customers of a select rural bank, there by building a credit rating model and deployment strategy for customers with different credit risks

Abstract

It is has become increasingly important to assess the personality of applicant before granting loan to predict credit risks. The personality can be judged by many parameters like psyche, demographic and psychographic details. The Pd which is probability of default is used to evaluate differential interest rate which should be charged to recover the loan and reduce the risk up to a great extent. Our model will help identify potential defaulters and suggests above the cutoff Pd of 0.6, loan should not to be approved. Our model also suggests the deployment strategy for customers with different default risks.