Banks turn to AI to contain loan frauds

Punjab National Bank isexploring the options to deploy an artificial intelligence-enabled early warning signal system that crawls the web for information on borrower’s activities, including news articles and social media. Punjab National Bank has decided to outsource its early warning signal (EWS) system. So far, the bank has been using an in-house system but wants an external agency to revamp it.

Some of the capabilities sought by the bank are artificial intelligence, web crawling, optical character recognition (OCR) for triggering the early warning signal. The bank has put out a public notice seeking bids from interested parties According to the notice, the bank wants a solution capable of giving early warning signals on a dynamic basis, based on information collected from various internal and external sources. This, the bank said, will aid timely corrective action in such loan accounts.

Indian banks have not been very quick in detection of frauds and instances include the Rs. 11,000-crore Nirav Modi case which went undetected for several years.

Anxious about the rising instances of frauds in banks and the delay in these being reported, the Reserve Bank of India (RBI) in 2015 took steps to address the problem. Based on the recommendations of an internal working group, the central bank introduced the practice of red-flagging a loan account as part of a mechanism of early warning system aimed at helping banks identify suspicious accounts.