The Need for Automation of Debt Syndication in India

Posted by Dollar Sprout on May 7th, 2016

Debt syndication is defined as an arrangement made between two or more than two financial institutions or banks to provide a credit facility to the borrower using common debt documents. It is mainly a process of distributing the fund, which is generally a large amount, into a number of investors or enterprises. In order to set aside a company from bankruptcy this service is generally used.

The profits and risk factors are shared by the lenders, investment firms and several banks who are involved in making a large loan by employing this financial service. Nowadays, the process has become complicated due to decline in the number of available lenders. Primary lenders involve banks as they tend to get involved in deals with less dispense that reduces the risk factor.

Adaptations to various associated risks and opportunity costs have led to the evolution of this type of loan. Number of alterations and modifications has occurred in this market since the commencement of these loans. Those banks and lenders that are involved in managing and arranging these loans are becoming aware of their own opportunity costs. The complexity that is connected with these loans gives the financers the need to analyze their accounting and processing approaches. The investors must analyze the type of efforts and work that is involved into managing loan payments and the opportunities that exist, such as reducing risk which is related to inefficiencies.

The automation seems to be the most obvious choice which is based solely on the ability to decrease inefficiencies. The variable and fixed projects need to be analyzed along with opportunity costs which are associated with launching a new system. Following examples may provide an insight of these type of costs that the bank must taken into consideration when choosing to head towards automation of syndicated loan accounting and processing.

  1. Project costs could be both fixed or variable which is associated with shifting from a manual approach towards the automated environment itself. In order to achieve this goal new processes and systems must be created.
  2. Cost which would consist of fixed cost of space needed to house hardware, licensing fees for automation tools and also the cost of technology support for the automated tool.
  3. How many other various resources needed to frame and maintain this process could be used otherwise more effectively?

The lenders must collectively decide whether or not this automated tool should be used for decision making or control. In simpler words, they must check, should the tool work more around the process and monitoring of information or they should further ponder on opportunity costs from information provided by the automation process.

Known for their incredible business ethics, Dollar Sprout is an advisory and finance organization that offers world class solution for every business needs through their debt syndicationIndia . From big corporate organizations to a budding entrepreneur, the requirements are given assistance to that benefits their clients.   

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Dollar Sprout
Joined: November 18th, 2015
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