EDA Case Study

Credit Risk Analysis BANK Dataset

By Shubham Ingole
Problem Statement:
• The lending institution faces challenges in identifying applicants at
risk of defaulting on their loans. The company seeks to leverage
Exploratory Data Analysis (EDA) to uncover patterns and significant
variables that serve as strong indicators of loan default. The objective
is to enhance risk analytics, allowing for informed decision-making in
the loan approval process. By understanding the key drivers of
default, the company aims to implement proactive measures, such as
adjusting loan terms or interest rates, to mitigate risks and ensure
responsible lending practices.
Percentage
of Loan
Defaulters
There are in total 8.1
Percentage of people who
have Defaulted
Cash Loan Vs Revolving
Loans

• Most loans are cash loans with

lower default rates.
• Customers who have taken cash
loans are less likely to default
Code Gender

• 1. Female Dominance:
• Majority of loans taken by
females.

• 2. Low Default Rate - Females:

• Default rate for females is ~7%,
indicating a safer profile compared
to males.
NAME TYPE SUITE

• 1. Unaccompanied Majority:
• Loans mostly taken by
unaccompanied individuals.

• 2. Acceptable Default Rate:

• Unaccompanied borrowers
exhibit an ~8.5% default rate,
considered acceptable.
• NAME INCOME TYPE :
• Safest segments include individuals who are
employed, commercial associates, and
pensioners.
• NAME_EDUCATION_TYPE:
• Individuals with higher education exhibit a
default rate of less than 5%, making it the
safest education segment for loan approval.
Univariate numeric
variables analysis
• 1. Goods Price Range: Predominantly, loans are
approved for goods priced between 0 to 1 million.

• 2. Credit Amount Distribution: Majority of loans

fall within the credit amount range of 0 to 1
million.

• 3. Annuity Payment Pattern: Most customers

make annuity payments in the range of 0 to
50,000.

• 4. Income Bracket: The majority of customers

have income levels between 0 to 1 million.
Bivariate Analysis
• Credit-Goods Price Relationship:
• Positive correlation between AMT_CREDIT and
AMT_GOODS_PRICE; as credit amount increases,
defaulters decrease.
• Income and Loan Risk: Customers with income ≤ 1
million are likely to take loans; caution needed for
those with loans > 1.5 million.

• Child Count Impact: Safer to lend to customers

with 1 to less than 5 children.

• Annuity Payment Influence: Customers with the

ability to pay annuity of 100K, up to 2 million,
represent a safer segment for loan approval.
Analysis on Merged Data

• Repair Purpose Applications: Majority of previous

applications were for repairing purposes.

• Cancellation in Repair Purpose: Applications for

repairing purposes have the highest number of
cancellations.

• Previous Cancellation Trends: 80-90% of applications

previously canceled or refused are found to be repayers
in the current dataset.

• Unused Offers Defaulting: Despite high-income

customers, unused offers in the past now exhibit the
highest number of defaulters.
Final Conclusion:
• Target Customer Profiles:
• Customers with income below 1 million.
• Those employed in Others, Business Entity Type 3, and Self-Employed
organizations.
• Occupations such as Accountants, Core Staff, Managers, and Laborers.
• Individuals with a house/apartment, married, and with children not
exceeding 5.
• Highly educated and preferably female.
• Safety Indicators:
• Unaccompanied individuals show a safer default rate of ~8.5%.
• Recommended Amount Segments:
• Credit amount not exceeding 1 million.
• Annuity set around 50K (subject to eligibility).
• Target income bracket below 1 million.
• Previous Application Insights:
• Consider customers with previous cancellations or refusals, as 80-90%
of them prove to be Repayers.
• Precautions:
• Avoid applicants associated with Transport Type 3 organizations.
• Exercise caution with Low-Skill Laborers and drivers.
• Be cautious with previously unused offers, even for high-income
customers.
Thank You