Loan recovery gets an AI push as major banks deploy virtual agents

Several financial institutions in India have started deploying artificial intelligence (AI) for collecting loan arrears. According to a report by The Economic Times, customers who miss their loan repayments are likely to receive a video call from an AI-generated avatar dressed as a lawyer with the single agenda of getting the repayment done.

AI is more efficient, cost-effective

Executives say the shift has delivered both cost savings and greater efficiency. The AI avatars, often designed to appear in sharp business attire, adopt a firm tone and use legal language to nudge customers into making repayments during the call, the report noted.

 

At the same time, they are programmed to remain polite and avoid crossing boundaries, a risk sometimes associated with their human counterparts. Additionally, AI’s ability to continue working nonstop also makes it more effective in connecting with borrowers than humans. 

 

A human recovery agent usually costs about ₹30,000 a month and manages around 250 cases. However, an AI agent is capable of making up to 20 times more calls and comes in 40–60 per cent cheaper. Resolution rates stand at 80–85 per cent, particularly in the zero-to-30-day delinquency window, largely for personal and commercial vehicle loans.

 

A bank executive told The Economic Times that most banks are using a mix of these products, wherein AI-generated video calls and text messages are sent to customers who missed their repayment, followed by visits by human executives in troublesome cases.

PSBs yet to adopt the model

Although public sector banks (PSBs) have not yet deployed such tools, they are beginning to explore them. The industry executive told The Economic Times that most lenders outsource their collection operations, while those managing them in-house rely on tech support from specialised firms. Key service providers in this space include Credgenics, Oriserve, and Sarvam AI. State-run banks, through the PSB Alliance, are also evaluating similar solutions, the report said.

 

The shift could change the debt recovery landscape. According to the news report, Rishabh Goel, co-founder and CEO of Credgenics, said the company’s advanced virtual collection bots are already assisting leading private banks such as ICICI Bank, HDFC Bank, and Yes Bank, along with NBFCs like L&T Finance, in reminding borrowers about upcoming or overdue payments.

Regulatory adherence in focus

Lenders remain cautious about compliance, ensuring AI agents operate within regulatory boundaries.

According to Reserve Bank of India (RBI) guidelines, financial institutions and their recovery agents:

• Cannot call borrowers before 8 am or after 7 pm
• Must not engage in intimidation or harassment of any kind, whether verbal or physical
• Are prohibited from actions intended to publicly humiliate or intrude upon the privacy of borrowers or their guarantors.