BANKING RISK ANALYSIS

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Presented by: Anjali K.

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Last Updated: July 4th,2025

Objective:

To uncover and present insights on loan, deposit, and risk dynamics in banking operations, supporting informed decisions on liquidity, collateral, and customer segmentation.

Number of customers started trending up on 2016, rising by 81.31% in 5 years.

Data Overview:

• Our dataset contains customer-level

banking records from 1995 to 2021.

• Customers belong to a mix of American,

African,Asian, and European nationalities,

enabling analysis across regions.

• Covers approximately 3,000 customers with

26 columns describing their demographics,

financial behavior, and risk indicators.

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1. Clients who joined in 2019,2020, 2021 are credit-seeking, entrepreneurially inclined, and focused on transactional over long-term banking.

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Encourage long-term savings via incentives.

Boosting deposits helps stabilize cash flow.

• Higher interest rates for saving accounts.
• Rewards (Cashback, Vouchers, Points).
• Insurance Bundling (Life/Health/

Accidental).

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Customer Segmentation by Age

• Majority of transactions were made by

customers aged 21–35.

• This suggests younger clients

are more active borrowers

— good for targeting marketing or products.

Customer Segmentation by Income

• High- and medium-income segments are the primary borrowers. These segments could be further engaged with premium loan products, tailored interest rates, or loyalty programs.
• Medium-income clients contribute the most to deposits, showing strong engagement
• For high-income clients, we can promote premium banking services.

Metrics :

• For every ₹1.00 loaned, only ₹0.82 exists in deposits
• Regulatory Red Flag: Below 1.0 violates Basel III recommendations
• Action: Freeze new loan approvals until deposits reach ₹1.10 per loan

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• Loan-to-Income Ratio (9.20):
• Loans are 9.2x borrower income—significantly high.
• Action: Strengthen affordability checks to prevent future defaults.

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• Probability of Default (0.35%):
• Currently low, but high loan-to-income ratio could increase risk.
• Action: Stress-test portfolios under economic downturns.

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Appendix

• Emphasis on Recent Years (2019–2021): Recent clients are more credit-seeking and entrepreneurial, reflecting post-pandemic trends. Older data is useful for longitudinal analysis but less relevant to current risk dynamics.
• Customer Growth (81.31% Rise, 2016–2021):
• Drivers: Digital banking adoption, targeted marketing to entrepreneurs, and relaxed onboarding during economic expansion.
• Sustainability: Growth may slow if economic conditions tighten. Focus on retaining high-value clients through loyalty programs.
• Young Borrowers (Aged 21–35):
• Why More Active?: Younger clients seek education/personal loans and fintech-like flexibility. Risk is moderate but requires monitoring due to lower collateral.
• Retention Strategy: Offer graduated products (e.g., student-to-career loans) and financial literacy programs.
• Income-Based Segmentation:
• High-Income Clients: They borrow for investments (e.g., mortgages) but prefer other institutions for deposits. Offer bundled services (e.g., wealth management) to capture deposits.
• Medium-Income Clients: Their deposit dominance suggests trust in the bank. Introduce hybrid accounts (savings + low-interest loans) to deepen engagement.
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Appendix

• Basel III Violation:
• Alternatives to Freezing Loans: Securitize existing loans to free up capital or issue bonds for liquidity.
• Competitor Benchmarking: Industry average is 0.95. We’re slightly below but need to act preemptively.
• Regional Risks:
• Variations: Asian clients show higher deposit ratios (1.2), Europeans higher defaults (0.5%). Customize collateral requirements by region.
• Marketing Focus:
• Priority: Balance both segments:
• Young borrowers: Short-term revenue (higher loan turnover).
• High-income clients: Long-term value (cross-selling wealth services).

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