4 Benefits Of Loan Reconciliation Automation For Banks

Loan reconciliation is a major process for banks. It helps them track the different types of loan products and keep a record of their status.

Today, all banks which give out loans need to have a loan reconciliation process in place. Most of these processes are time-consuming, monotonous, and error-prone.

But thanks to new-age technologies, these processes can be easily automated.

Our client, a lead bank in the Indian BFSI space did the same. But before we talk about that, let's cover the basics:

What Is Loan Reconciliation?

Loan reconciliation is the process of analyzing loan product data such as total files, files receive, files not received, status, etc., and then producing a summary report for each loan product type.

Why Is Loan Reconciliation Important?

Loan Reconciliation is critical because it provides agents and lenders with accurate information about loan asset ownership.

This is generally done through a manual or automated process for validating position data.

The Loan Reconciliation Process

The loan reconciliation process is quite tedious. The main objective of the process is to provide users with a detailed analysis of various loan products.

This includes checking their current file Status and the count of files received after validation in the system.

The process is so tedious because of the number of loan products that exist in the ecosystem.

Loan Reconciliation Steps

• Collecting data from various sources
• Tagging them based on the loan type (home, business, agriculture, tractor, education, auto, etc.)
• Calculating the count for each loan type
• Finding out the status of each loan
• Reconciling the loan items as per the criteria
• Preparing a cumulative reconciliation report

Loan Reconciliation Example

Let’s take an example. Our client, a leading bank was facing issues with manual loan reconciliation.

Their Central Processing Unit Team approached us to create an automated system to reconcile the data provided by their vendors and ascertain their validity.

Problems With Manual Loan Reconciliation

There are a lot of problems with loan reconciliation when done manually. Let's highlight the most crucial ones.

• Several loan types: Depending on the loan type, they need to be grouped which is quite a hassle
• Excel limitations: Data consolidation of all product type is impossible because the count goes beyond 10 lakhs
• Repetitive steps: To overcome excel limitations, the data needs to be split into several buckets. Each bucket then needs to be taken care of separately
• Summarizing data is cumbersome: Once the data is reconciled for each of the buckets, the summary report needs to be prepared on a cumulative data set.

Benefits Of Automated Loan Reconciliation

An automated approach to loan reconciliation can drastically increase process efficiency and reduce the turn-around time. Let’s look at some of the major benefits:

• Single data source – With the use of a database, data can be stored and fetched from a single source. This also ensures that the users can keep a track of all the data used in the process.
• Handling of large data volume – Rather than segregating the dataset into various buckets, the data can be cumulatively processed. This removes the limitations imposed by Excel.
• Quick summary report – Post data processing, it can be quickly summarized, and a report can be created fast
• Easy cumulation – The summary report can be easily combined with the previous day’s report to give a holistic view

How Did SheetKraft Help In Automating Loan Reconciliation?

SheetKraft runs on logic. Once we fed the processing logic to the system, we created an automation flow very fast.

The digital set up of this process made it extremely flexible for our client to access the report. They could now open the SheetKraft portal anytime and find the reports.

SheetKraft's loan reconciliation automation helped our client have an annual savings of 1 man-year.