Email: contactus@precisa.in
Phone number: +91 98450 76647
  • Solutions
    • DSA Service
    • Forensic Investigation
    • Bank Statement Analysis
    • GSTR Analysis
    • Credit Report Analysis
    • Account Aggregator Integration
    • Anti-Money Laundering (AML) Analysis
  • APIs
  • Clients
  • About
  • Blog
  • Pricing
  • Sign In
Try Now
Bank Statement Analysis, Uncategorized

The Art and Science of Alternative Credit Scoring Using Bank Statement Analysis

June 4, 2025 precisateam No comments yet
Alternative Credit Scoring Using Bank Statement Analysis

Why is alternative credit scoring gaining momentum in India? Before exploring the reasons, let’s take a quick look at the context.

Lenders disbursed over 383 million loans in FY 23-24 alone. Even though the financial market has shown this phenomenal growth, more than 160 million Indians remain “credit invisible”. In fact, 22% of Indian adults are still unbanked. Yet most of them have good salaries and pay their bills on time.

This limited visibility into their spending and financial behaviour has made this population segment largely “unscorable” through the traditional methods. In this scenario, alternative credit scoring methods, such as AI-led bank statement analysis, can solve this problem.

How? Let’s explore.

What is Alternative Credit Scoring

In the alternative credit scoring approach, banks and lenders use non-traditional data sources to check an applicant’s financial health and capabilities. Instead of using only credit bureau reports and CIBIL scores, lenders review multiple digital footprints.

These are as follows:

  1. Phone, fuel, and electricity bills
  2. Monthly rental
  3. Salary credits or other income sources
  4. UPI transactions
  5. Smartphone metadata
  6. Maintenance of account balance
  7. Social media credit signals
  8. EMI payments and their bounce rates
  9. Activities across digital wallets

With alternative credit scoring, lenders can reach individuals who do not have a formal credit history but are responsible in spending their income. This approach is particularly accurate for borrowers like

  • Freelancers, contract workers, and gig artists
  • First-time loan applicants without any credit history
  • Home-based business owners
  • MSMEs and small-business owners
  • Self-employed job workers, like plumbers and nannies

Since the approach provides a 360° view of customers’ financial profiles, it helps lenders improve accuracy and lending decisions, and inclusivity, and reduce risks.

Why Lenders are Shifting Towards Alternative Credit Scoring Models

Interestingly, traditional models, like CIBIL, Experian, or CRIF, only focus on past loans, credit cards, and repayment history. However, in India, people prefer receiving cash as salaries or other means instead of bank transfers.

Alternative credit scoring is happening faster than ever because of the benefits it offers:

[table id=11 /]

How Bank Statement Analysis Empowers Alternative Credit Scoring

Alternative Credit Scoring Using Bank Statement Analysis

Even though bank statements contain thousands of raw and unorganised transactions, they are extremely important for revealing a borrower’s true financial behaviour. Modern analysis tools convert this raw data into meaningful and actionable insights within minutes.

Here’s how bank statement analysers help lenders:

1. Recognise Comprehensive Transaction Pattern

Advanced algorithms can scan thousands of scattered and unorganised transactions automatically in real time and categorise them into various segments for easy interpretation.

This includes regular income sources with amounts and dates, monthly fixed expenses, such as EMIs, rent, and electricity, diverse spending, such as groceries, travel, and food, expenses made in discretion, like e-commerce purchases, and any income fluctuations that may impact the cash flow.

2. Show an Exhaustive Cash Flow Evaluation

Bank statement analysis can generate comprehensive cash flow profiles of different applicants, showing the following:

[table id=12 /]

3. Detect Risks in Real-Time

Sophisticated algorithms can mark potential risks based on various criteria and assign scores.

  • For instance, too many overdrafts may indicate cash flow issues, while ATM withdrawals twice or thrice a week may show cash dependency.
  • Similarly, applying for loans too often indicates overspending, and multiple round-number transactions are generally considered suspicious activities.

Features that Make Modern Bank Statement Analysis Tools Effective

Advanced bank statement analysis tools infuse AI and machine learning and combine security, speed, and insights to make alternative credit scoring more effective for lenders.

Here are the important features that they must consider:

1. Smart Parsing

OCR technology reads PDF statements from all major Indian banks. Lenders can extract transaction data with 99% accuracy and reduce manual data entry errors and processing delays considerably.

2. Clean Transaction Categorisation

Machine learning algorithms automatically tag recurring income, utility payments, and EMI debits into respective categories. They further segregate transactions, like investment activities, wealth building, entertainment spending, food, and other essentials, for detailed analysis.

3. Risk Scoring Models

Advanced platforms, like Precisa, generate customised creditworthiness scores ranging from 0 to 1000 or 1 to 10 based on:

  • Consistency of payment across different time periods
  • Income graph, whether it grew or declined over the months
  • Volatility of account balance
  • How stable is income over a period

These scores complement traditional credit scores by providing real-time financial behaviour insights.

4. Fraud Detection and Irregularity Verification

Automated flagging algorithms identify concerning activities like:

  • Bank balances inflated artificially before the loan application
  • Repeated number of circular transactions between similar accounts
  • Salary credits fabricated or misguided information
  • PDF statements forged through sophisticated image editing tools
  • Equal debits and credits, which might be due to money rotation
  • Cheques deposited on national holidays

5. Customised, Data-Driven Risk Profiling

Since standardised lending rates and products are not able to serve diverse audiences effectively, an emerging solution for financial inclusion is tailored loan products.

As such, alternative credit scoring using bank statement analysers helps lenders to design borrower-specific risk profiles based on real bank data.

Instead of one-size-fits-all models, lenders tailor loan offerings, including smaller ticket sizes that align with the borrower’s actual cash flow and repayment capacity.

Final Thoughts

The RBI has been actively encouraging digital credit assessment. Account aggregators like Sahmati and India Stack make it easier for financial institutions to access verified user data (with consent).

Alternative credit scoring, backed by intuitive bank statement analysis systems like Precisa, is aligned with this shift toward an open and inclusive credit system.

Precisa’s cloud-based analytics solutions and dynamic scoring models are helping lenders expand clientele beyond traditional profiles, speed up loan approvals, and manage risk smarter, all while keeping operations lean.

With its streamlined module fully integrated into loan origination systems, you can gain a new perspective of your applicants and improve portfolio allocation performance.

Request a free demo to explore Precisa’s advanced credit scoring features!

  • Bank Financial Statement Analysis
  • Bank Statement Analysis

Post navigation

Previous
Next

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Search

Categories

  • Bank Statement Analysis (122)
  • Credit Appraisal (35)
  • Digital Lending (120)
  • Fintech (81)
  • NBFC Software (3)
  • Uncategorized (1)
  • Understanding Precisa (17)

Recent posts

  • The͏ C͏re͏dit Bur͏e͏͏a͏u͏ & Bank Stateme͏͏nt Co͏͏mbi͏nation
    Credit Bureau & Bank Stateme͏͏nt: Ho͏w the Duo Reduc͏es Lending ͏͏R͏isk
  • RBI's Decision to Exclude Fintech Loans
    Understanding RBI’s Decision to Exclude Fintech-Sourced Loans from Default Coverage
  • Extract Hidden Insights from Consumer Credit Bureau Reports
    Beyond CIBIL Scores: Pulling Hidden Insights from Consumer Credit Bureau Report

Tags

account aggreagtor AI in Fintech API To Get Bank Transactions Automated Bank Statement Analysis Bank Bank Accounts Bank Financial Statement Analysis Bank Statement Analysis Bank Statement Analysis API Bank Statement Analysis Tools bnpl Case Study cash flow analysis co-lending Credit Appraisal Credit Appraisal Software Tools credit bureau Data Quality and Integrity digital lending due Due Diligence early embedded finance Financial Data Analysis Tools financial inclusion Financial Industry financial security financial startups Financial Statement Analysis Software fintech fintech companies fintech startups Fraud Investigation GST GSTR gstr analyzer Lenders loan management system Loan Rates money laundering MSME nbfc open banking precisa rbi

Continue reading

The͏ C͏re͏dit Bur͏e͏͏a͏u͏ & Bank Stateme͏͏nt Co͏͏mbi͏nation
Bank Statement Analysis

Credit Bureau & Bank Stateme͏͏nt: Ho͏w the Duo Reduc͏es Lending ͏͏R͏isk

June 30, 2025 precisateam No comments yet

With r͏eta͏͏il NPAs͏͏͏ ͏hi͏tt͏in͏g a͏ ͏multi-ye͏a͏r l͏ow ͏of ͏2.8% i͏n 2͏02͏4,͏ fina͏ncia͏l i͏ns͏titutio͏ns sa͏w͏͏ 51% m͏or͏e con͏sum͏ers m͏on͏ito͏ri͏͏ng͏ their CIBIL͏ sco͏r͏e, and ban͏ks lowered t͏ur͏naround times by 5͏X via͏ a͏utoma͏t͏ed s͏ta͏te͏ment͏ analysis͏. Ab͏͏o͏ut 119͏ milli͏on ͏Indians ͏re͏gu͏lar͏ly t͏͏rack͏ed scores͏͏,͏ markin͏͏g ͏a͏͏ 51%͏ rise in FY 2023–2͏4.͏͏ In this scenario, c͏ombining credit bureau data ͏with de͏ta͏i͏le͏d ba͏nk͏ […]

Short-term vs Long-term Cash Flow Analysis
Digital Lending

Addressing the Short-term vs Long-term Cash Flow Analysis Dilemma

June 13, 2025 precisateam No comments yet

Delinquencies in India increased by 44% among personal loan borrowers between Dec ’23 and June ’24. This highlights the importance of accurate and informed decision-making during loan approvals and, more importantly, the need to rethink how lenders approach cash flow analysis of individual and commercial borrowers. Although conventional lenders in India, including banks, typically rely […]

Bank ͏Statemen͏ts
Bank Statement Analysis

GST Returns vs. Bank ͏Statemen͏ts: T͏he Power͏ of Cross-Verification in B͏usiness Lending

June 9, 2025 precisateam No comments yet

Indi͏a is home t͏o over 14 million registered͏ GST taxpayers as of 2024, refl͏ecting the v͏ast ͏scope of businesse͏s c͏om͏plyin͏g with indirect ta͏x la͏ws. Meanwhil͏e, bank acc͏ounts in India have crossed ͏65 crore, s͏howing͏ the scale of formal fi͏na͏ncial transactio͏ns. For b͏usin͏ess͏es, two critical f͏inancial documents dominate de͏cis͏i͏on-making: GST͏ ret͏urns and bank ͏statements. GST͏ re͏turn͏s […]

Mumbai

403, Mayuresh Chambers, 4th Floor, Sector 11, CBD Belapur, Navi Mumbai, Maharashtra 400614

https://g.co/kgs/buJcESj
Pune

Rachana Park, 3rd Floor,Atreya Society,
Off. Senapati Bapat Marg,Wadarvadi, Pune,
Maharashtra – 411016

Links
  • Cancellation Policy
  • Terms Of Use
  • Privacy Policy
Subscribe to our newsletter

Sign up for our weekly newsletter to get the latest news, updates & amazing offers delivered directly in your inbox.




    © All Rights Reserved • Precisa • MADE WITH ❤️ & ⚡ IN INDIA.