Artificial intelligence is rapidly transforming India's debt recovery landscape, introducing a wave of innovation that promises increased efficiency, reduced costs, and a more ethical approach to collections. "Meet the bot collector," as the industry is now calling it, highlights how AI-powered solutions are rewriting the debt recovery playbook in the country.
Driven by the increasing challenges of Non-Performing Assets (NPAs) in the banking and lending sector, and with the Reserve Bank of India (RBI) expressing concerns, financial institutions are turning to AI to minimize risk and streamline recovery processes. Public Sector Banks (PSBs), in particular, are adopting AI-driven digital solutions to reduce NPAs and enhance recovery outcomes, aiming to bridge the efficiency gap with their private counterparts.
One significant development is the deployment of AI-generated avatars by several financial institutions to contact customers who have missed loan repayments. These AI agents, often appearing as lawyers in business attire, use a firm but polite tone and legal language to encourage repayments. Unlike human recovery agents, who manage around 250 cases a month at a cost of approximately ₹30,000, AI agents can work non-stop and handle a significantly larger volume of cases.
Companies like Neowise and Sarvam AI are at the forefront of this technological shift. They have jointly developed AI-driven tools such as NeoBot, a Debt Collection VoiceBot, and NeoSight, an AI Call Analytics Tool, which leverage advanced large language models (LLMs). These solutions improve efficiency by about 15% and reduce costs by 33%, providing better borrower insights and enhancing decision-making for lenders.
DPDzero, another Indian startup, has raised $7 million in Series A funding to further develop its AI-driven debt recovery infrastructure. Their platform automates and streamlines debt collection for various financial institutions, including banks, NBFCs, fintech firms, and microfinance institutions. DPDzero's platform uses behavioral data, AI virtual agents, and human operations to engage with borrowers across multiple communication channels, segmenting them based on risk and repayment behavior. This approach aims to improve recovery outcomes and deliver more ethical and efficient debt recovery across both digital and in-person channels.
Spocto X, a Yubi Company, is also making significant strides in the sector. Their AI platform analyzes borrower behavior, predicts default risks, and deploys tailored interventions, reducing operational costs by up to 57% while boosting recovery efficiency. The Central Bank of India reported a substantial improvement in its Special Mention Account (SMA) ratio after integrating Spocto X's technology, dropping from 8% to 3%.
However, challenges remain. Legacy systems and rural connectivity issues can hinder the widespread adoption of AI in debt recovery. Despite these obstacles, regulatory support for digitization, including RBI guidelines promoting ethical AI use, is accelerating adoption.
The integration of AI in debt recovery is not just about automation; it's about redefining borrower engagement with hyper-personalized strategies. By using AI, lenders can ensure faster, more accurate debt recovery without resorting to outdated or coercive tactics.
