NBP NBP CASH n GOLD PRODUCT SCORECARD USER MANUAL

National Bank of Pakistan

NBP CASH n GOLD

CONSUMER PRODUCT SCORECARD
USER MANUAL
NBP NBP CASH n GOLD PRODUCT SCORECARD USER MANUAL
National Bank of Pakistan

This document is for internal use of National Bank of Pakistan employees only.
Any act of divulgence to third parties shall be viewed seriously and warrant
disciplinary action.

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 NBP NBP CASH n GOLD PRODUCT SCORECARD USER MANUAL
National Bank of Pakistan

TABLE OF CONTENTS
1. INTRODUCTION ............................................................................................. 4
2. PURPOSE...................................................................................................... 4
2.1. Responsibility for Implementation ......................................................................................... 4
2.2. Custody and Access ................................................................................................................. 4
3. MODEL OVERVIEW ........................................................................................ 5
4. SCORECARD STRUCTURE – PARAMETERS & THEIR BRACKETS (ATTRIBUTES) ........... 5
4.1. Age ............................................................................................................................................... 5
4.2. Gender ......................................................................................................................................... 6
4.3. Marital Status ............................................................................................................................... 6
4.4. Educational Qualification ............................................................................................................. 6
4.5. Dependents .................................................................................................................................. 6
4.6. Residential Status......................................................................................................................... 7
4.7. Length of Residence ..................................................................................................................... 7
4.8. Contactability ............................................................................................................................... 7
4.9. Net Monthly Income / Salary in PKR ............................................................................................ 7
4.10. Debt Burden ............................................................................................................................... 8
4.11. Number of Times in Days Past Due (60 DPD and Above) .......................................................... 8
4.12. Customer Class ........................................................................................................................... 8
4.13. Total Length of Employment / Business .................................................................................... 9
4.14. Length of Banking Relationship with NBP.................................................................................. 9
5. MANDATORY FIELDS .................................................................................... 10
6. SCORE BANDS AND MAPPING WITH SBP RATING GRADES ................................. 10
6.1. Rating Grade Definitions ............................................................................................................ 10
6.2. Mapping of Defaulted Accounts to SBP Rating Grades for Default ........................................... 10
7. OVERRIDES AND ENHANCEMENTS .................................................................. 11
8. ROLES AND RESPONSIBILITIES ....................................................................... 11
A. ROLES AND RESPONSIBILITIES OF ASSIGNER ................................................................................ 11
B. ROLES AND RESPONSIBILITIES OF REVIEWER ............................................................................... 11
9. REPORTING OF SCORECARD RESULTS ............................................................. 12
ANNEXURE A: SCORE BAND AND SBP RATING GRADE DEFINITION ...................... 13

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 NBP NBP CASH n GOLD PRODUCT SCORECARD USER MANUAL
National Bank of Pakistan

1. INTRODUCTION
As per the Guidelines on Internal Credit Risk Rating Systems issued by the State Bank of Pakistan
(SBP) vide BSD Circular No.8 dated October 29, 2007 (Rating Guidelines), all banks are required to
rate their consumer portfolio in accordance with the provisions of the Guidelines and report the
ratings/ scores in the e-CIB. Besides compliance consideration, NBP fully appreciates the need to
introduce sound credit risk assessment process through introduction of scorecard that measures the
credit worthiness of the customer based on the credit initiation data.

Due to lack of relevant past data required for developing a statistically validated scorecard, an expert
judgment scorecard has been developed that has been post development statistically validated and
is transcribed onto the Information Technology Group (ITG) Centralized User Management System
(CUMS).

2. PURPOSE
The document represents NBP Cash n Gold scoring user manual and describes the Bank’s scorecard
drivers, attributes, scoring process, mechanism for overrides, MIS reporting, and other factors /
guidelines for usage and maintenance of the Expert Judgment NBP Cash n Gold Scorecard.

2.1. Responsibility for Implementation

Commercial Retail Banking Group (CRBG) shall have the overall responsibility for
implementation of this document. The policies contained in this document should be followed by
all the Branches / Regions of the bank for smooth functioning of the product.

2.2. Custody and Access

This document should remain in the joint custody of CRBG and RMG. Copies of the policy must
not be provided to any external party without the prior approval of the Heads of Commercial,
Retail Banking Group (CRBG) and Risk Management Group (RMG). However, access to this
document shall not be restricted for such external parties who are entitled to such access in
accordance with the provisions of any law for the time being in force.

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3. MODEL OVERVIEW
The Scorecard model takes in to account possible aspects / parameters / default divers of a
prospective borrower to be analyzed which are selected with co-ordination / inputs and accord with
CRBG in line with the industry best practices.

The model parameters are as follows:

S. No Parameters
1 Age
2 Gender
3 Marital Status
4 Educational Qualification
5 Dependents
6 Residential Status
7 Length of Residence
8 Contactability
9 Net Monthly Income/Salary in PKR
10 Debt Burden Ratio
11 Number of times in DPD (60 DPD and above)
12 Customer Class
13 Total Length of Employment / Business
14 Length of Banking relationship with NBP
Total

4. SCORECARD STRUCTURE – PARAMETERS & THEIR

BRACKETS (ATTRIBUTES)
NBP’s Cash n Gold scorecard consists of the following default drivers. Each default Driver has a set of
brackets which identify and explain different attributes of an applicant:

4.1. Age
This default driver describes the applicant’s biological age at the time of submitting the
application. The age shall be calculated based on the applicant’s date of birth as provided in the
application form and verified by the CNIC. Following are the age brackets that shall be used:

Age Bracket
Below 21 years and/or above 65 years
21 - 24.99 years
25 - 29.99 years
30 - 34.99 years
35 - 39.99 years
40 - 44.99 years
45 - 49.99 years

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50 - 54.99 years
55 - 65.00 years

4.2. Gender
Gender of the applicant is provided in the application form and is verified by the CNIC. Following are
the attributes/brackets assigned to this default driver that shall be used to score the applicant
falling under each attribute.

Gender
Male
Female

4.3. Marital Status

The Marital status default driver describes the applicant’s marital status at the time of submitting
the application. The marital status shall be determined based on the information provided by the
applicant in the application form. Following are the attributes/brackets that shall be used:

Marital Status
Single
Married

4.4. Educational Qualification

It describes the applicant’s educational qualification at the time of submitting the application.
The educational qualification status shall be determined based on the information provided by the
applicant in the application form and verified from the educational certificates. Following are the
attributes/brackets that shall be used:

Educational Qualification
Post graduate & above
Graduate
Intermediate / Higher Secondary / Short Courses / Diploma Holder
Up to Matric

4.5. Dependents
The dependents of the applicant can be found in the application form as provided by the applicant at
the time of submitting the application. The dependents status shall be determined based on the
information provided by the applicant in the application form. Following are the
attributes/brackets that shall be used:

Dependents
Nil / One
Two
Three
Above Three

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4.6. Residential Status

The under discussion default driver describes the ownership status of the property where the
applicant is residing at the time of submitting the application. The residential status shall
be determined based on the information provided by the applicant in the application form.
Following are the attributes/brackets that shall be used:

Residential Status
Owned and not mortgaged
Company provided accommodation
Government provided accommodation
Living in family owned property (parents/brother or some other family member)
Owned but mortgaged
Rented (on sharing basis)
Rented (individual)

4.7. Length of Residence

Length of residence reflects the duration of residence by the applicant at his/her current
residence at the time of submitting the application. The length of residence status shall be
determined based on the information provided by the applicant in the application form. Following
are the attributes/brackets that shall be used:

Length of Residence
Above 10 Years
Above 5 Years & up to 10 Years
Above 1 Year & up to 5 Years
Less than 1 Year

4.8. Contactability
Contactability refers to the number of different contact points / phone numbers (home, office and
mobile) an applicant has provided while applying for NBP Cash n Gold Loan. All verified numbers
provided by the applicant shall be considered while arriving at the score. Following are the
attributes/brackets that shall be used:

Attributes of Contactability
Land Line at home –given
Land Line at home - not given
Land Line at office –given
Land Line at office -not given
Cell Phone number – given
Cell Phone number - not given

4.9. Net Monthly Income / Salary in PKR

This default driver describes the net monthly income / Salary of the applicant in PKR as provided in
the application form and verified by the concerned personnel at the product’s business and / or

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processing function1 . In case of difference between the income figures as provided by the
applicant and those that are verified by the Bank; the latter shall be used. Following are the
attributes / brackets for net monthly income:

Net Monthly Income (PKR)

Less than 5,000
5,000 to 7,499
7,500 to 9,999
10,000 to 12,499
12,500 to 19,999
20,000 to 29,999
30,000 to 49,999
50,000 to 74,999
75,000 or more

4.10. Debt Burden

Debt Burden describes the ratio of monthly debt payment commitments to total income, as
reflected in the customer e-CIB report at the time of application. The DBR shall be calculated by the
assigner according to the NBP’s policy / formula as presented in the approved Cash n Gold product
program. Following are the attributes/brackets for DBR:

Debt Burden Ratio

Below 20%
20 to 39.99%
40 to 44.99%
45% to 50%

4.11. Number of Times in Days Past Due (60 DPD and Above)
It describes the number of times an applicant has gone in 60+ DPD, as reflected in the customer e-
CIB report at the time of application. Following are the attributes/brackets for the “number of
times applicant has been in DPD” and their corresponding scores:

Number of times in DPD

0
1
2
3
More than 3 times in DPD or N/A (No credit history in e-CIB)

4.12. Customer Class

Customer class refers to the occupation status of the applicant at the time of submitting the
application. The customer class shall be determined by utilizing the information provided by the
applicant in the applicant form. Following are the attributes/brackets that shall be used:

1
Product’s business and / or processing function include Branch, Region, Consumer Hub, Head Office or any
other designated function(s) as per product’s policy / program.
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Customer Class
Employees of Federal, Provincial Government (permanent)
Employees of Local Government and Autonomous Bodies
Employees of Armed Forces (Army, Navy and Air force), Legal profession (Lawyers,
judges etc.)
Employees of Law Enforcement Agencies
Employees of Government institutions (contractual)
Employees of Public Sector Entities
Employees of Multinational Companies
Employees of Large Local Corporates
Employees of Banks
Employees of Insurance Companies
Employees of other private/public limited companies /organizations (other than
multinational and large local corporates)
Self Employed / Business Person
Others

4.13. Total Length of Employment / Business

It describes the total employment experience of the applicant at the time of submitting the
application. Applicant will be asked to provide this information in loan application form. This
information can be verified based on employment letter if deem necessary by the Branch official.
Following are the attributes/brackets that shall be used:

Length in years
Less than 2 years
2 years to 3.99 years
4 years to 5.99 years
6 years to 7.99 years
8 years to 11.99 years
12 years or more

4.14. Length of Banking Relationship with NBP

This default driver indicates the length of time since the applicant is maintaining an account
with NBP. Following are the attributes/brackets that shall be used:

Length of Banking Relationship with NBP

No relationship/ up to 5.99 months
6 months to 0.99 year
1 year to 2.99 years
3 years to 4.99 years
5 years or more

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5. MANDATORY FIELDS
All fields in the application form (and subsequently in the system application interface) that lead to
score generation are mandatory. This is to ensure that the score generated depicts a reasonably
comprehensive position of the applicant in terms of credit worthiness and validation of each
scorecard driver going forward is based on a good and representative data history. It is also
mentioned that Application form is not the only source to ascertain the borrower information
required for scorecard, processing personnel can also use reasonable judgment to complete the
fields of scorecard.

6. SCORE BANDS AND MAPPING WITH SBP RATING GRADES

NBP’s Cash n Gold scorecard can generate a theoretical minimum score of 203 and maximum score
of 1000. For appropriate credit risk evaluation of the overall NBP Cash n Gold portfolio of the bank
and mapping of the scores to the rating grades as provided by SBP in its Guidelines for Internal
Credit Risk Rating Systems; the following nine score bands have been created by the bank and
mapped to the respective SBP grades:

Score Bands SBP Rating Grades

920 to 1000 1
838 to 919 2
749 to 837 3
655 to 748 4
560 to 654 5
466 to 559 6
377 to 465 7
295 to 376 8
203 to 294 9

The minimum acceptable Score for financing is set at 560 or Rating Grade 5.

6.1. Rating Grade Definitions

The definition of the score bands and SBP rating grades as mentioned above are
provided in Annexure - A.

6.2. Mapping of Defaulted Accounts to SBP Rating Grades for Default

NBP Cash n Gold scorecard pertains to evaluation of the customer at the time of
application lodging.

However, for those NBP Cash n Gold customers that go into past-due status, rating grades 10-
12 are to be used. In this case, irrespective of the application score of the customer at the time
of commencement of relationship; the rating grades shall be assigned as under:

Rating Grade 10: Sub-standard and shall include accounts with 90-179 DPD

Rating Grade 11: Doubtful shall not be applicable for Consumer Cash n Gold Product

Rating Grade 12: Loss and shall include accounts with or over 180 DPD

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7. OVERRIDES AND ENHANCEMENTS

Overrides in Scorecard are used against the output of the model, if judgment or any other factor
assesses the borrower to be a better / worse credit than the assessment done by scorecard itself.
Rating override(s) is basically a decision to change the final rating produced by the model rather
than amending inputs to the model before the final rating is produced.

The override authority shall rest with limit sanctioning / approving authority.
Note: A maximum of 1 notch rating downgrade / upgrade can be executed in the Scorecard
model. While using, overrides option the assigner must inquire about the reasons for overrides
and mention the same in the scorecard. Documentary evidence must be obtained to ensure
the accuracy of the information. Override rating is approved by the limit sanctioning authority.
However, due care must be taken that using overrides option is not a frequent exercise. An MIS
of overrides shall be maintained by CRBG that would be available as and when needed.

8. ROLES AND RESPONSIBILITIES

A. ROLES AND RESPONSIBILITIES OF ASSIGNER
Assigner may be Relationship Manager / Associate, Credit Officer, Area Credit Officer, Branch
Manager, Area Branch Manager, dealing officials of CIU / Consumer Hub or any authorized person.
Assigner being the first and foremost person in credit origination has the pivotal role and
responsibilities including but not confined to the following:

 To ensure system based input of scorecard.

 Rate impartially / dispassionately with honest intention to safeguard the bank’s interest.
 Have adequate rationale behind every score given in the scorecard.
 To ensure that if the derived / recommended rating is modified at the limit
sanctioning authority and the rating has been finalized then the same is available with
Assigner.
 Take full responsibility and own the mistakes made during scoring process.
 Seek guidance from rating guidelines / seniors in case of confusion while filling the
scorecard.

B. ROLES AND RESPONSIBILITIES OF REVIEWER

Reviewer / Approver may be Regional Head / RM Credit / Area Credit Officer / Area Branch
Manager, dealing officials of CIU / Consumer Hub / CRBG or any other authorized person. The
following are the roles and responsibilities of Reviewer:
 To independently review the rating sheet and ensure that rating is filled properly in
system based scorecard version.
 To verify from the facts and figures that data input is correct and representing the true
picture of the borrower.
 To make sure that scorecard is free from errors.
 To record / rectify the errors made by the assigner.
 To discuss the rating with the assigner in case of any contradiction / difference of
opinion.
 Take full responsibility of the assigned rating.
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 While executing overrides, adequate reasoning and justification for the same should
be documented.
 Change / Assign new rating where required with documented justifications.
 Verify the rating migrations made (if any) and document such cases.

9. REPORTING OF SCORECARD RESULTS

The Centralized User Management System (CUMS) will be used for Cash n Gold Product Portfolio.
Information Technology Group (ITG) has developed an in-house scorecard’s system based version
which can be accessed using following URL:

http://10.11.5.46/cums/controls/login.aspx

The UAT of the system has already performed by ITG / CRBG. Moving forward, ITG will be
responsible for its bank wide system based deployment.
It is suggested that results of the scorecard will be shared with RMG through user access. This data
will be used for analyzing the scorecard results and MIS preparation / data validation etc.

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ANNEXURE A: SCORE BAND AND SBP RATING GRADE

DEFINITION

SBP Rating
Definition
Grades
This means that the credit exposure is of the highest quality and has minimum
1 credit risk. The applicant’s capacity and willingness to meet its financial obligations
in time is extremely strong and is unlikely to be adversely affected by the
economic or foreseeable events.
This means that the applicant is of a very good quality in terms of credit risk.
2 The obligor’s capacity to meet its financial commitment on the obligation is very
strong and is not significantly vulnerable to foreseeable events.
This means that the applicant is of good quality in terms of credit risk, whose
capacity to meet its financial commitment to the obligation is still strong,
3
however there are elements present, however minor, which may suggest a
susceptibility to impairment sometime in the future. This category is more
susceptible to adverse effects of changes in circumstances and economic conditions
than obligations in higher rated categories.
This means that the applicant is of medium quality in terms of credit risk and
bears average security and certainty of timely fulfillment of financial obligations.
4 Although capability and willingness of the obligor are adequate however,
certain protective elements may be lacking or may be characteristically unreliable
over any greater length of time. Although adequate protection parameters are
present yet, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity of the obligor to meet its financial commitment
to the obligation.
This means that the applicant is of lower medium quality in terms of credit risk,
whose future cannot be considered as well assured. Such customers bear high risk
5
associated with their capability or willingness to fulfill their financial obligations in a
timely manner and face major uncertainties or exposure to adverse business,
financial or economic variations which could lead to their inadequate capacity to
meet financial commitment.
This means that the applicant is of poor quality in terms of credit risk. Fulfillment
of financial obligations over any longer period of time may be uncertain.
Although the obligor currently has the capacity and willingness to meet its financial
6
obligations, yet is more vulnerable to non-payment than obligations rated 5.
Capacity for continued payment is contingent on a sustained, favorable
business, financial and economic conditions. Even non-distinct variations in the
business, financial or economic conditions will likely impair the obligor’s capacity or
willingness to meet its financial commitment on the obligation.
This means that the applicant is of poor standing in terms of credit risk and there
may be elements of danger with respect to fulfillment of its financial obligations.
7 There exists a current vulnerability to non-payment, and the capability to meet
financial obligations is dependent upon favorable business, financial, and
economic conditions. Very high risk factors are present and negative variations of
business, financial and economic conditions of any scope mean real risk of default.
This means that the capacity of the obligor to meet its financial commitments
8 is currently highly vulnerable and at any time may discontinue its payments. Its
capability to meet its financial obligations depends on distinctively positive
development of the sector and industry of the operation of the obligor.

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The obligor bears the highest default risk exposure and is virtually in default
9 but payments on the obligations are still continued. Even the positive
development of the business, financial and economic conditions need not mean
its capability to meet its financial obligations. Moreover, obligors falling in 61 – 89
DPD are to be treated as “Watch list”.
10 Sub-standard shall include accounts with 90 – 179 DPD.
11 Doubtful is not be applicable for Consumer Cash n Gold Product.
12 Loss shall include accounts with or over 180 DPD.

For purpose of reporting to SBP, grades 10 and 11 will be treated as Sub-standard.

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