THE ALGORITHM FOR CALCULATING THE OPTIMAL CREDIT LIMIT FOR RETAIL EXPRESS LOANS
I.N. Mastyaeva, E.G. Volovatova
One of the main steps in the loan decision process is maximum credit limit calculation. At the moment there is no universal methodology for calculating such a limit, the bank has the right to independently develop the methodology by which the maximum limit will be assigned. Despite the fact that there is no universal methodology for calculating the limit, the principles of which banks make a decision are similar. As a rule, the PTI (payment-to-income) index is calculated on the basis of information about the client’s income and his credit history. However, in the case of express loans this approach is not applicable, since the income that is the main element in the calculations cannot be verified. This article suggests an alternative methodology for estimating the maximum limit in the case of express loans. Based on reliable information (credit report), a study has been conducted on which parameters related to PTI depends on the risk of default. After that, the function of calculating the optimal credit limit for the retail express loans at a given risk level is constructed, which allows increasing the Bank’s profitability by product.
Keywords: retail loans, express loans, credit risks, maximum limit, PTI, credit report.