Indian Lenders Deploy AI for Loan Collections Amid Heatwave Disruption Fears

Indian lenders are increasingly deploying artificial intelligence for collections and customer acquisition as they brace for disruption from an intensifying summer heatwave across large parts of India. Segments such as microfinance, gold loans, and lending to the self-employed continue to rely heavily on cash-based collections. In addition, a portion of equated monthly instalment (EMI) bounce resolutions still requires on-ground visits. Heatwaves tend to disrupt such field operations, weighing on overall collection efficiency. The shift towards AI is also being accompanied by tighter underwriting in climate-sensitive areas. The India Meteorological Department has warned of above-normal heatwave days between April and June across several regions, heightening concerns around curtailed field activity, industry executives said. Jairam Sridharan, MD of Piramal Finance, said collections were not hit in April but company remains cautious. "Our priority is employee welfare, and we want to ensure they are not exposed to risks such as heat stroke." The lender has been scaling up AI-led tools. "We have deployed systems that identify borrowers likely to pay digitally, those who need physical follow-ups, and the optimal timing for engagement, reducing manual intervention and allowing field teams to focus on complex cases," he added. The concern is grounded in recent experience. During last year's heatwave, lenders saw collection efficiency fall by 50-200 bps in Q2. This year, lenders expect a similar trend with collections likely to dip by around 2% points, though AI tools are expected to cushion the impact.