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Credit Delivery
What is Straight-Through Processing (STP) in the context of retail loan applications?
STP is an automated credit processing system where retail loan applications below a defined threshold (e.g., Rs 25 lakh) are evaluated and decided by credit underwriting engines using bureau scores and rule engines without manual intervention.
What does RBI permit regarding the use of Straight-Through Processing (STP) in retail credit delivery?
RBI permits STP under specified governance frameworks, requiring model validation, audit trails, and override mechanisms.
What is model risk in Straight-Through Processing for retail loans?
Model risk is the risk that incorrect or biased credit underwriting models may lead to systematic mis-lending, where creditworthy borrowers are rejected or unworthy ones are approved due to flawed algorithms or assumptions.
What is an override workflow in STP-based credit underwriting?
A process that allows human reviewers to manually assess and override automated credit decisions in edge cases.
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