On May 15th, RBI Deputy Governor Swaminathan J cautioned non-banking financial companies (NBFCs) against over-reliance on algorithm-based credit models. While these models offer efficiency and scalability, they may lack transparency in decision-making processes.
The financial landscape has witnessed a significant transformation with the adoption of artificial intelligence (AI) in credit assessments. This shift aims to make credit more accessible, especially for small businesses and everyday borrowers who have traditionally faced barriers to financing. However, integrating AI into credit assessment processes poses challenges, including concerns about transparency, fairness, and the need to prevent unfair influencing lending decisions.
On May 15th, RBI Deputy Governor Swaminathan J cautioned non-banking financial companies (NBFCs) against over-reliance on algorithm-based credit models. While these models offer efficiency and scalability, they may lack transparency in decision-making processes, which can raise concerns about fairness, hampering efforts toward financial inclusion.