Author
LoansJagat Team
Read Time
5 Min
20 Jun 2025
Are Indian lenders still struggling with loan defaults despite all the tech buzz? That’s a big yes. Even today, many lenders in India face rising NPAs (Non-Performing Assets), missed repayments, and credit fraud. But here’s the twist—some are turning the tide with smart technology. Not big words. Just smarter ways of doing what banks were already doing.
India’s digital lending market recently hit ₹2,76,000 crore in small-ticket loans alone. That’s a huge number, and behind it is tech. Real-time decisions, automated credit scoring, and instant disbursals are no longer science fiction.
Old-school risk checks are way too slow. The problem is manual paperwork, phone calls, and gut-based approvals. All of this slows down lending and leaves loopholes wide open.
Now, tech is flipping that script, especially with AI—artificial Intelligence. It's not the scary robot kind. It’s just software that looks at data smarter and faster than a human ever could.
All this happens while the customer sips chai.
Applicant Data | Old Process Time | AI Tech Time | Loan Risk Category |
₹40,000 monthly income | 3 days | 15 minutes | Medium |
₹12,000 monthly digital spend | 5 days | 20 minutes | Low |
No CIBIL score history | Manual rejection | 10 mins | Predictive Low |
If a borrower had no formal credit history, banks said “no.” But tech doesn't stop there. It checks mobile recharges, UPI spends, and even food orders. Every tap creates a digital breadcrumb. AI collects them. Then it predicts your future.
It’s not perfect. But it’s faster, cheaper, and smarter than paperwork.
Let’s say a lender receives 10,000 loan applications a month. With manual processing, each loan takes 1.5 hours, which is 15,000 man-hours a month.
Now, enter AI-powered tools. Processing time drops to 10 minutes per application.
Time saved = (1.5 hours - 0.17 hours) x 10,000 = 13,300 hours per month
Imagine using that time to grow your lending book instead of checking documents.
These apps do more than send you a WhatsApp message after loan approval.
They do full-cycle monitoring, from application to closure. More importantly, they now track what you do with the money.
Yes, the end-use of the loan. That’s the big thing now.
Let’s say you took a ₹75,000 personal loan, claiming a medical emergency, but you bought a phone instead. Earlier, nobody checked. Now, they do.
Apps track:
Loan Purpose Stated | Transaction Detected | Alert Raised? | Action Taken |
Medical | Mobile store | Yes | EMI increase |
Education | Fee payment | No | On-track |
Business purchase | No spend detected | Yes | Loan freeze |
This tech-led follow-up system is tight. It keeps borrowers honest and lenders safer.
A lender gives 1,000 such ₹75,000 loans per month. If 10% misuse it and default:
Total risk = 100 x ₹75,000 = ₹75,00,000
But if monitoring catches half of these early:
Loss reduced = ₹37,50,000 recovered before default
That’s not minor. That’s survival in the loan business.
Sometimes, risk control isn’t just about clever tech. It’s also about backing. That’s where government-backed guarantee schemes come in.
But let’s be honest—what really changed is how fast these systems got digitised.
Earlier, applying for a guarantee felt like a job interview. Now? A few clicks.
These guarantees now cover:
Collateral-free personal loans
Scheme | Max Guarantee Limit | Borrower Type | Avg Processing Time |
Small Biz Loan | ₹2,00,000 | MSMEs | 2 days |
Youth Enterprise | ₹1,00,000 | 18-28 yrs, no income | 1.5 days |
Emergency Credit | ₹50,000 | Farmers, vendors | Same day |
Why does this matter for risk? Simple. When the government guarantees part of the loan, lenders are more open to approve it—even if the profile is slightly risky.
But with tech, now they track those guarantees better. Which means fewer scams, better recovery rates, faster rollouts.
And better access for common folks.
This is where you’ll see the difference clearly.
Feature | Traditional Lending | Tech-Based Lending |
Time to Disburse | 7-10 days | 10 minutes |
Risk Detection | Manual reviews | Real-time AI alerts |
Document Verification | Physical visits | Instant digital KYC |
EMI Follow-Up | Monthly calls | In-app auto reminders |
India is ready for faster, safer credit. What’s holding it back is resistance to tech, not the tech itself.
Let’s stop calling this “innovation.” This is just evolution.
Loan frauds, fake borrowers, ghost accounts can all shrink with better tech. But here’s the catch. It only works if adopted widely, not just by a few flashy fintechs.
Smaller NBFCs, cooperative banks, and even state-run lenders need this shift. Because tomorrow’s lending is not about more loans, it’s about safer loans.
If tech does one thing well, it keeps lenders one step ahead.
1. What technology do banks use to detect fake loan applications?
Banks now use AI, facial recognition, device fingerprinting, and document validation tools to detect fakes. These tools flag mismatched data instantly.
2. Is AI in lending legal in India?
Yes, as long as it follows RBI guidelines for digital lending. Lenders must disclose how AI decisions are made and ensure data privacy.
3. Can a person with no credit score get a loan?
With alternate data like UPI spend, mobile bill history, and salary credit patterns, lenders can now score even zero-credit borrowers.
4. How do lending apps track the end-use of loans?
They check transaction patterns, merchant codes, and even time spent on the app. If spending looks fishy, risk teams are alerted.
5. Why do lenders still face losses even after using technology?
Tech is a tool, not magic. It reduces risk but doesn't erase it. Success depends on how well the tech is used and how fast lenders act on its alerts.
About the Author
LoansJagat Team
We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?
Quick Apply Loan
Subscribe Now
Related Blog Post