the-playbook.in

There’s a thought that has been sitting with me for a while, and the more portfolios I look at, the harder it is to ignore. Keeping portfolio delinquency low is not just about credit quality. It’s also about keeping the portfolio young. By young, I don’t mean new as in inexperienced teams or reckless growth. I mean average age of the loan book , measured in months on book. Let me explain where this comes from. Delinquency doesn’t show up evenly over time Almost every lending product behaves the same way if you track it long enough. Early months are usually clean. Then delinquencies start appearing. There’s a phase where defaults peak. Eventually, things stabilize or run off. This is not theory. You see it in microfinance, MSME, LAP, unsecured personal loans. The timeline differs, but the shape doesn’t. So when I see a portfolio with very low delinquency, one of my first silent questions is not “how great is underwriting?” but: How old is this book? Why a young book automati...

Somewhere between the tenth and twentieth portfolio I reviewed, I realised I was no longer surprised by failures. The products kept changing. Home loans, MSME, EV, solar, supply chain. Secured, unsecured. But the reasons things went wrong started repeating themselves. Sometimes slowly, sometimes all at once.

I didn’t start my career in risk modelling. I’m an accountant by training. My early years were spent in accounting and finance roles, working on things like OPEX and CAPEX planning, budgets, and variance tracking. Numbers, yes. But not credit models. Statistically, my toolkit was basic. Mean, median, standard deviation. Some idea of correlation, regression, and probability from textbooks. Nothing fancy. No machine learning. No advanced econometrics. So when I say this, I mean it honestly: If I could understand ECL and work with it comfortably, almost anyone in finance can. ECL looks complex mainly because of how it’s presented, not because of what it’s trying to do. At its core, ECL is built around one very practical question: If this borrower fails to pay in the future, how much will I realistically lose? Everything else exists only to answer this question in a structured, regulator-acceptable way. Before we talk about ECL, let’s talk about provisioning When I was in core f...