Collateral Module: Additional Features

Reduce risk of appraiser & customer collusion

Goals

To provide deeper support for various collaterals & increase the adoption of the Collateral Module. This document lists down some of the features that can be added to the current collateral module.

Some of the collaterals typically used in the industry are:
1. Equities
2. Shares of cooperative banks by members: Loan is granted on the dividends from profits of bank, not the inherent value of the shares itself
3. GST write offs, invoices & cash flows for MSMEs

Open source collateral modules are seeing limited adoption in the industry due to the minimal features supported. These modules typically have a definition of the collateral & an associated static collateral value. To increase the adoption, we must offer a deeper support for collaterals
Summary of this document can be found here

#	Title	User Story	Importance	Notes
1	Insurance of collateral	As a loan administrator, I should be able to capture the details of the insurance taken for the collateral	Must have	Cost of insurance, chargeable to lender/borrower, pay out amount% Essential for some collaterals, for eg, vehicles
2	Markdown due to depreciation/damage of asset	As a loan administrator, I should be able to markdown asset due to damage identified during appraisal or depreciation through tenure	Must have
3	Collateral Tracking	As a loan administrator, I should be able to capture any unique ID associated with the collateral	Must have	Essential for moveable collaterals like vehicles or inventory
4	Tracking fair market value	As a loan administrator, I should be able to know the current value of collateral of loan	Good to have	Integrate market indices for collateral into the module, eg: gold, real estate Essential for tracking LTV through tenure & securing repledge if required
5	Reduce appraiser & customer collusion	As a loan administrator, I should be able to create and document an audit process for collaterals	Must have	Integrate an audit process: dates, agents, findings Specify guidelines for independent audit, frequency required
6	Liquidity & price stability of collateral	As a loan administrator, I should be able to price in the risk due to liquidity/price stability of collateral	Good to have	Could include a holistic measure of risk from lack of liquidity & price stability

Please refer to this document for further details of features & prioritisation.

Loan top-ups are assumed to be handled separately outside the collateral module & are not covered here
Facility to convert a secured loan into a secured loan (in loan take overs) are to be handled outside the collateral module
Non-human centric approaches to appraisal such as algos/CV requiring significant effort are not taken up in this version
Usage of poverty module to relax collateral & LTV thresholds is also not taken up here