Tata Capital sees reduction in credit cost on AI integration

Mumbai: Tata Sons’ non-banking finance company (NBFC) subsidiary Tata Capital said on Thursday that it has witnessed some tangible benefits of using artificial intelligence (AI) in credit decisions and monitoring.

Managing Director and CEO Rajeev Sabharwal said the portfolio monitoring platform has helped strengthen risk management and reduce the cost of credit by 14 basis points on an annual basis. NBFC said in a statement.

Tata Capital’s consolidated credit cost, including the erstwhile Tata Motors Finance portfolio, stood at 1.2% in FY26, down 20 basis points from FY25. Cost of credit is the total provisions and charge-offs expressed as a percentage of assets and represents the risk associated with a portfolio of loans.

“AI is a tool built on your smart processes and your ability to use data in real time. So, the engine helps us do things faster and use multiple sources of information, but at the same time the brain behind it in parallel is the approach we have in terms of credit policy and using available data to make credit decisions,” Sabharwal told reporters in a post-results call.

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“If your credit policies are not strong, if your processes are not strong, AI may not be able to help you. So when the combination of both work together, you see more benefits.”

According to Sabharwal, its use AI remains a key strategic priority for the organization. He said the company’s ‘Voice Hub’ is used across sales, service and retention, with voice AI agents now accounting for 15% of its direct personal loan business and handling 90% of greeting calls. Moreover, AI-powered credit assessments now help insure 80% of a small business portfolio, leading to shorter decision cycles and a 30% increase in credit manager efficiency.

The impact of artificial intelligence on business

The company announced consolidated net profit ₹1,502 crore in the three months to March, up 43% from the same period last year. The total loan book was as follows: ₹2.7 trillion as of March 31, an increase of 21% compared to the previous year.

Tata Capital is not the first NBFC to announce the impact of AI on its business. In February, Rajeev Jain, vice-chairman and managing director of Bajaj Finance, said AI had listened to 20 million calls and converted audio into text. It was stated that text-to-data conversion occurred for 520,000 customers, resulting in 100,000 new offers that the lender had no prior knowledge of.

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Tata Capital’s Sabharwal said the lender’s West Asia war had little impact on its customers. “When we talked to customers who were there The SME (small and medium enterprise) or large corporate side has stocks of raw materials that help them overcome this situation. Likewise, they say that the raw material is available and they can produce,” said Sabharwal.

He said there had been some impact on his customers’ cost structures, but most said they could pass it on and no one had mentioned any major disruptions.

“We think we need to be more careful about certain parts of the MSME (micro, small and medium enterprise) business, and our message to our credit team at this point is that you need to look at some of the segments within MSME and try to understand more than just the working capital cycle at this point.”