51 | Annual Report | 2025-2026 Our strategic decisions for expansion or consolidation at the Market or Branch Level are based on comprehensive secondary data analysis, monitoring performance indicators like early PAR of 6 months and 12 months to identify geographic challenges. At the product level, we customize financial products for diverse client profiles, such as Saral loans for lowincome female borrowers, ArohanPrivilege loans for customers with credit history and MELs for small entrepreneurs, each with specific eligibility criteria. Our Credit Committee oversees the credit policies, ensuring they are formulated through extensive deliberation among key stakeholders. 2. Credit Administration We apply credit policies through a dual approach that includes a technology-enabled rule engine and fieldlevel physical processes. Each product is governed by specific credit policies integrated into our loan origination system, allowing field officers to make real-time decisions. To gather essential information about applicants’ financial situations, we employ rigorous verification methods, including site visits and personal discussions. To mitigate risk arising from expansion and portfolio concentration, we follow a standard operating procedure called ‘Vistaar’, ensuring a structured approach to geographical growth, along with quarterly reviews of portfolio concentration against board-approved limits. 3. Credit Underwriting Arohan’s Credit Underwriting process is committed to minimizing credit risk while ensuring sound decisionmaking in loan origination. To achieve this, the team has implemented a comprehensive three-layered Credit Underwriting Process, which includes: 1. Credit Rule Engine Embedded in the Loan Origination System (LOS) Arohan’s Credit Committee serves as the ultimate custodian of credit policies, developed through extensive deliberations with key stakeholders. Policies are guided by RBI Master Directions on Microfinance, SRO guidelines, MFIN guidelines, industry practices, and market-specific portfolio quality. For each product, the Credit Committee determines the credit instruments and benchmarks, which are then published as Credit Circulars. 2. Field-Level Credit Appraisal Acknowledging the inherent challenges in verifying income and savings of microfinance borrowers, Arohan emphasizes physical verification conducted by Sourcing Customer Service Representatives (CSRs) and cross verification by Branch Heads (BHs). This includes on-site visits to the borrowers’ residences or workplaces, where detailed demographic, economic, and credit behavior data is collected. The information gathered forms the foundation of the Household Income Assessment and the calculation of the Fixed Obligation to Income Ratio, both of which are integral to the microfinance loan decision- making process as per the Reserve Bank of India (Non-Banking Financial Companies – Credit Facilities) Directions, 2025. To ensure consistency and accuracy, CSRs and BHs undergo continuous training and refresher sessions focused on effective Customer Due Diligence (CDD) and Personal Discussions (PD). 3. Quality Checking of KYCs and Borrower Credentials The cornerstone of any successful loan appraisal is establishing the borrower’s identity. The process begins with e-validation of KYC documents, which helps confirm key details such as residential address, Credit Bureau reports, and bank account information. All loan applications sourced by the field team are reviewed by a central hub team for quality of documents uploaded. The team verifies and matches the documents submitted for the borrower and co-borrower with the details in the loan application form. The details in the voter’s ID card are validated from the EPIC portal, and the bank account details are validated by a penny less drop test. Our Company also uses AI-enabled applications to identify potential manipulation or tampering in documents submitted by customers The central hub team also checks the live image of the customer uploaded with the ID documents and image of the customer with Branch Head during cross verification as a part of the underwriting checks. When all these data points align, the chances of incorrect borrower selection are minimized. Due to the critical nature of this step, the process is centrally managed, independent of business influence, ensuring unbiased judgments. Through this three-layered approach— combining automated rule-based checks, field-level verification, and stringent KYC validations—Arohan strives to optimize credit risk management. This reduces the cost of credit while maintaining the highest standards
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