Smart Loans, Smarter Banks: The Rise of AI in Indian Loan Management
DOI:
https://doi.org/10.64882/ijrt.v14.iS1.1034Keywords:
Artificial Intelligence, Loan Management, Indian Banking System, Digital Transformation, Credit Risk, Financial InclusionAbstract
Indian banking industry is rapidly going digital, artificial intelligence (AI), technology-driven data are defining trend. Of all banking processes, AI implementation has most disturbed lending. Since ages there have been long delays in processing loans in Banks of India because of subjective credit appraisal process (Test time values) which increases high operational cost of Banks of India as NPAs augment, financial frauds multiply. Limitations have compelled banks to pursue smart technology-driven decisions to enhance efficiency, accuracy, fairness of lending operations. It is on this background that Indian banks are heavily embracing AI in an attempt to introduce new innovation in their loans management. Paper examines how artificial intelligence is revolutionizing process of loan management in Indian banks based on most important functional domains such as, credit scoring, risk assessment, automatic loan approval system, fraud detection tools, NPA prediction models. Conceptual research design is used in the research, sources used are secondary data which include academic papers, market reports, banking magazines, proper case precedent. Findings indicate that efficiency and precision of loan approval procedures, decreasing the dependency on the personal judgment of the individuals, and increasing the overall risk management competence could be significantly improved by AI-driven lending systems. With machine learning algorithms and predictive analytics, the banks are now better endowed to be able to predict the credit worthiness of borrowers, and any possible default risks at an early stage. And AI led loan management services also benefit the customer experience and financial inclusion by providing retail, MSME and small business customers with faster access to credit. Nonetheless, despite its merits, the AI-based loan management system also has its grave problems - privacy and confidentiality of the data, discrimination of algorithms used, lack of transparency and clarity of regulations etc. particularly in the setting of Indian banking. Therefore, the paper hints at the idea that although AI can potentially make Indian banks smarter and stronger, in addition to the suitable governance frameworks and ethical AI practices, the adherence to the established regulation norms as well as a reasonable policy are both critical to the growth of banking in India.
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