PNB turns to AI to curtail loan frauds

CIOReviewIndia Team | Thursday, 29 October 2020, 14:26 IST

Punjab National Bank (PNB) are looking to deploy artificial intelligence (AI)-enabled early warning system for crawling the web for information on borrowers’ activities, which includes news, articles and social media interactions.

The bank has been under the scanner because of Nirav Modi scam and witnessed a few willful defaults. It has now decided to outsource its early warning signal (EWS) system, due to which the bank has been using an in-house system but wants it revamped.

The capabilities sought by the bank are AI, web crawling, and optical character recognition (OCR) for triggering the early warning signal.

PNB has put out a public notice for seeking the bids from interested parties. As per the notice, PNB wants a solution capable of giving early warning signals on a dynamic basis, which will be based on information collected from the various internal and external sources. PNB aims to aid timely corrective action in such loan accounts.

The Nirav Modi case we undetected for years which is Rs. 11,000 crore.

The bank is worried of rising fraud, and delays in these being reported, the Reserve Bank of India (RBI) in 2015 took steps for addressing the problem, based-on which the recommendations of an integral working group, the central bank introduced the practice of red-flagging a loan account as part of an early – warning system aimed for helping banks identify suspicious accounts.

In 2015, " RBI said, “These signals in a loan account should immediately put the bank on alert regarding a weakness or wrongdoing which may ultimately turn out to be fraudulent. A bank cannot afford to ignore such EWS but must instead use them as a trigger to launch a detailed investigation into a red-flagged account.”

In between this, PNB reported bad loans of more than Rs.1 trillion or 14.11 percent of its aggregate loans as of 30th June.

Alerts sought by PNB are for non-achievement of projected financials which are given at the time of sanction, and if the financials submitted to a bank are different which were submitted to regulatory authorities, any time or cost overrun or any negative development which may interfere in the proceedings, disrupt cash transactions, and verification and genuineness of the receivables and debtors which includes overseas debtor among others.

The central bank has acknowledged the application of AI to the fintech industry stating the forms of automated data analysis, chatbots and robot-advisers. It said, “AI is being employed to detect fraud by monitoring patterns of customer behavior.”

“Experts predict that India trails some other nations in AI usage. The adoption of AI in finance and banking in India is growing rapidly, which are still, the applications are support-related and not meant for making decisions. Wherein, China many of the critical tasks like loan sanctions are now handled by AI,” Dilip Asbe, chief executive of National payments Corporation of India (NPCI) said earlier this month.

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