New Delhi: Looking to bring down the rising bad debts under the Mudra scheme, the Modi government plans to use artificial intelligence (AI) to conduct lie detection, psychometric and sentiment detection tests of the borrowers through an online loan appraisal system.
The Modi government launched the Mudra scheme in April 2015 with an aim to provide access to formal credit to millions of self-employed people looking to start or expand their own venture.
However, with the amount of non-performing assets (NPA) under the scheme increasing at a fast pace and banks unable to handle the large volume of applicants, the state-owned administrator of the scheme, Micro Units Development and Refinance Agency Ltd, has sought expression of interest from potential bidders for an online loan appraisal system.
The online loan appraisal system proposes to take the entire process beginning from application to approval online while helping banks to take sound credit decisions with the use of technology like AI.
Also read: MUDRA scheme: What the Modi government failed to do for small businesses
Rising bad loans
NPAs of state-run banks under the Mudra scheme rose to Rs 7,277 crore as of March 2018, as against Rs 3,790 crore in March 2017 of total Mudra loans and Rs 597 crore in March 2016.
To be sure, the overall Mudra loans have also risen. While Rs 2.54 lakh crore of loans were sanctioned under the scheme by all lending institutions in the year ending March 2018, Rs 1.80 lakh crore of loans were sanctioned as of end March 2017 and Rs 1.37 lakh crore was sanctioned as of end 2015-16. In the year 2018-19, Rs 1.88 lakh crore of loans were disbursed.
Under Mudra, three types of loans are disbursed to the borrowers — Shishu, or loans up to Rs 50,000, Kishor, or loans between Rs 50,000 and Rs 5 lakh, and Tarun, or loans between Rs 5 lakh and Rs 10 lakh.
“Shishu Borrowers mostly includes people from lower strata of society who do not have basic documents to help lenders to assess their repayment capability, which make their appraisal difficult for bankers,” said the document inviting expression of interest.
“Large number of loan applications under PMMY (Pradhan Mantri Mudra Yojana) also makes it difficult for bankers to process and appraise the loans which leads to poor credit decisions and increase in number of NPA,” it said.
“Online platform should help bankers to make sound credit decisions by the use of technologies such as Artificial intelligence, Psychometry test, Lie detection etc.”
Online system
The document proposes to enable borrowers to fill their application online, upload documents supporting loan application and submit e-KYC documents. In case a borrower is unable to do this, the bank can also submit these documents on behalf of the borrower.
The online loan appraisal system will also enable bankers to conduct video interviews of the borrowers, record their answers and subject them to lie detection tests. Further, the system will also use the borrower’s tax return form and its credit history to assess their credit worthiness.
The system will also be linked to GST network, among others.
“It is not easy for banks to assess the credit worthiness of small borrowers. The attempt now seems to be give banks whatever clues they can get to speed up decision making while ensuring loans to good borrowers,” said a banker with a state-owned bank who did not wish to be identified.
Also read: In MUDRA, India’s young and women entrepreneurs find a growth story
SSSS…….. lie detectors should also be used against every politician whether they are genuinely promising and discharging their duties as per the oath taken by them and manifestoes released by them…