16. Client diligence and suitability
Underwriting tells you whether to lend. Client diligence tells you whom you are lending to and what you should know about them beyond the credit decision. Suitability tells you whether the product you’re offering is right for that borrower.
These three are interlinked. A borrower may pass underwriting (capacity to repay) but fail diligence (unverifiable address, hostile promoter litigation, industry under regulatory action) or fail suitability (a short-tenure WC line offered to a borrower whose cash-flow cycle is 120 days).
The pages in this section are a cross-cutting playbook for the diligence and suitability work that runs alongside (and partly inside) the underwriting engine. They cover what to check, when, how, and what evidence to retain.
| Page | Covers |
|---|---|
| 16.1 Pre-application diligence | Soft checks before borrower invests time; pre-qualifies fit |
| 16.2 Borrower-type-specific protocols | Proprietor, partnership, LLP, Pvt Ltd, public, HUF, trust, society — what each entity type requires |
| 16.3 Promoter and BO background diligence | Beyond bureau — litigation, social, professional history, BO graph completion |
| 16.4 Industry-specific compliance diligence | NIC-code-driven checks: PCB, factories, FSSAI, drug licence, telecom, finance, etc. |
| 16.5 Customer and supplier verification | Verifying claimed counter-parties; cross-checking with GST / bank data |
| 16.6 Physical verification protocols | Field-FI standards beyond the basics — manufacturing, retail, services-specific |
| 16.7 Continuous monitoring and ongoing diligence | What to re-check post-disbursement and on what cadence; behavioural triggers |
| 16.8 Suitability assessment | Matching product to borrower; rules for declining a mismatch |
| 16.9 Recovery-readiness from underwriting | What to capture at sanction that helps recovery later if the loan turns bad |
Why these are separate from underwriting
Section titled “Why these are separate from underwriting”Underwriting is decision-tight: rule passes / fails, scorecard contributes / doesn’t, decision is APPROVE / DECLINE / REFER. Diligence is knowledge-broad: facts collected and retained that may not bear on the immediate decision but matter operationally, for monitoring, for recovery, for compliance audit.
The two collaborate. Many diligence items feed underwriting rules (e.g., promoter litigation flag may be a soft-decline rule). But the diligence file is a fuller record than the decision_run trace — it captures the lender’s complete view of the borrower, not just the bits that drove the decision.
Operational ownership
Section titled “Operational ownership”| Function | Owner | Cadence |
|---|---|---|
| Pre-application | Sales / channel | At lead stage |
| Entity / promoter / BO verification | KYC / KYB ops | At application + periodic |
| Promoter background (beyond bureau) | Risk / compliance | At application; periodic |
| Industry compliance | Risk / credit | At application; renewal |
| Customer / supplier verification | Credit analyst | At application |
| Physical verification | Field operations | At application; periodic; on EWS |
| Continuous monitoring | Risk / ops | Daily / weekly / per signal |
| Suitability check | Credit | At application |
| Recovery readiness capture | Credit + ops | At sanction |
Audit perspective
Section titled “Audit perspective”Every diligence item belongs in the borrower’s diligence file, accessible per loan / per borrower, retained per record-retention policy. Internal audit periodically samples diligence files for completeness.
How thin-file underwriting interacts
Section titled “How thin-file underwriting interacts”For thin-file borrowers (6.14 onwards), diligence is heavier — references mandatory, field visit mandatory, customer / supplier verification deeper. The diligence pages here describe the standard protocol; thin-file underwriting adds intensity on top.