Automating Central Bank-Compliant Loan Document Generation for All Loan Types

Client Overview

Yes Bank, established in 2004, is a leading private sector bank in India with a nationwide presence. Headquartered in Mumbai, it ranks as the seventh-largest private sector bank by market capitalization (source: Forbes India). With a network exceeding 1,100 branches and 1,800 ATMs across India.

Problem Statement/Challenges

The Reserve Bank of India, on October 1, 2024, mandated that all banks and Non-Banking Financial Companies (NBFCs) provide a Key Facts Statement (KFS) at every stage of loan processing and whenever the conditions of the loan agreement change.

So, what exactly is a key facts statement?

Key Facts Statement (KFS) is a document that provides borrowers with crucial loan details before signing any agreement with banks or NBFCs. This includes information on interest rates, fees, penalties, and EMI amounts.

To meet a tight deadline for complying with new Reserve Bank of India regulations, Yes Bank partnered with Auriga IT to develop a standalone system for automatic generation of Key Facts Statements (KFS) and loan agreement (a legal contract between a borrower and a lender). This system aimed to produce KFS documents for all loan types, ensuring compliance and efficiency. However, Yes Bank faced several challenges down the road:

• Customization- Yes Bank issues different types of loans, and each loan product has unique features and terms, requiring customization of the KFS. Creating and managing templates for various loan types increases complexity.
• High Volume- As the 7th largest bank, Yes Bank handles a massive volume of loans. Generating and delivering KFS documents for every loan, especially during peak periods, can strain resources and systems.
• Compliance and Auditing- Maintaining accuracy and complying with evolving RBI regulations for KFS is critical. This necessitates a robust system to audit and verify KFS data, further increasing the complexity of the process.

Solutions

1. Centralized Regulatory Updates- Keeping up with constantly changing RBI regulations used to be a major pain, involving manual updates across numerous systems. To simplify this process, we created an UI based centralized system where a designated “caretaker” can easily update the system with the latest regulatory changes. These changes are then automatically applied across all relevant areas, ensuring accurate and up-to-date KFS reports are generated and sent to all customers who take out loans from Yes Bank.
2. KFS Document Editor- We’ve streamlined the process of updating KFS documents to comply with RBI guideline changes:

• Makers (business owners) propose changes: Using the system, makers can easily implement necessary updates based on new RBI guidelines.
• Checkers review and approve: Proposed changes are then reviewed by designated checkers who ensure accuracy and compliance.
• Automatic KFS generation: Once approved, the changes are automatically incorporated into the final KFS document.

3. KFS Portal for Agent- We developed a portal for Yes Bank agents that streamlines KFS management and improves communication with customers.

• View KFS history: See a complete record of all KFS reports for each customer.
• Track consent status: Check whether a customer has accepted their KFS report.
• Resend consent links: Quickly resend the consent link to customers who haven’t received it.

Project Outcomes

• Enhanced Transparency: Customers receive clear, concise, and standardized information about their loans.
• Improved Efficiency: Central system to manage & generate KFS documents on the go.
• Regulatory Compliance: Ensures adherence to the latest RBI guidelines.