Team Blitz India
NEW DELHI: The RBI has cautioned the country’s non-bank finance companies (NBFCs) against getting over-reliant on algo-based credit models or they may regret later.
“It is crucial to recognize that rule-based credit engines are only as effective as the dataand criteriaupon which they are built. Overreliance on historical data or algorithms may lead to oversights or inaccuracies in credit assessment, particularly in dynamic or evolving market conditions,” RBI Deputy Governor Swaminathansaid in a speech. The speech was uploaded on the central bank’s website on May 16.
Algorithm-driven lending models use various indicators, ranging from cash flow data to home addresses, to swiftly generate approvals for personal loans.
