RBI Deputy Governor urges lenders to use AI and ML for stress detection

Reserve Bank of India Deputy Governor S C Murmu has urged lenders to increase the use of artificial intelligence (AI) and machine learning (ML) to identify early signs of borrower stress. Speaking at the 7th CII NBFC and HFC Summit, Murmu emphasized that these technologies are essential for managing asset-quality risks as credit growth accelerates within the non-banking financial sector.

Murmu advised that lenders implement rigorous stress testing, early warning systems, and dynamic provisioning. He cautioned that rapid credit growth must not compromise underwriting standards, stating, “Growth must never come at the cost of underwriting standards.”

The Deputy Governor noted that non-banking financial companies (NBFCs) and housing finance companies (HFCs) have transitioned into specialized, technology-driven institutions that serve niche markets and underserved areas. Currently, NBFC credit accounts for approximately 16.7 per cent of India's nominal GDP, up from 15.9 per cent the previous year.