An account holder of a bank applied for a Home loan and got loan application app

Question

An account holder of a bank applied for a Home loan and got loan application approval including the check for loan amount after 3 days. The bank works for 8 hours on each day. Based on the time study report for the employees of a similar bank for loan approval process, the following are the maximum time that may be spent for a loan approval process:  

-  Application receiving : 8 minutes

-  Recording application information in the system : 30 minutes

-  Credit checking   : 2 minutes

-  Approval of Loan  based on Bank policy considerations:  1 hour

Determine process cycle efficiency(PCE) when above four items are the Value added times.

     Now, say, you have collected the best-in-class loan application processing PCE to be 15%.  Determine PLT based on the above value added time and the best in class PCE. Once you get the PLT, determine WIP cap to achieve desired PCE, ( Note: your ER or exit rate is 1/(VAT : 8+30+2+60) =0.01 application per minute )

Explanation / Answer

Ans Calculation Of Process Cycle Efficiency

A. Value Added Time :

1. Application Receiving : 8 Minutes

2. Recording Application : 30 Minutes

3. Credit Checking : 2 Minutes

4. Approval Of Loan Based On Considerations : 60 Minutes

Total Value Added Time (1+2+3+4): 100 Minutes

B. Total Time Taken To Complete The Loan Approval Process : 3 Days =3*8*60=1440 Minutes

C. Process Cycle Efficiency : Total Value Added Time /Cycle Time : 100/1440=6.94 %

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