Tata Capital sees reduction in credit cost on AI integration

Mumbai: Tata Capital, the non-banking financial company (NBFC) subsidiary of Tata Sons, on Thursday said it has witnessed some tangible benefits of using artificial intelligence (AI) in its lending decisions and monitoring.

The portfolio monitoring platform has helped strengthen risk management and reduce credit cost by 14 bps year-on-year (y-o-y) in FY26, said Rajeev Sabharwal, managing director and chief executive of the NBFC, in a statement.

Tata Capital’s consolidated credit cost, including the portfolio of erstwhile Tata Motors Finance, stood at 1.2% in FY26, down 20 bps from FY25. Credit cost is total provisions and write-offs expressed as a percentage of assets, and indicates the risk associated with a loan portfolio.

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

“If your credit policies are not strong, if your processes are not strong, then AI may not be able to assist you. So, it's the combination of both of them when they work in tandem that you see more benefits coming in.”

According to Sabharwal, the use of artificial intelligence remains a core strategic priority for the organization. He said that the company’s ‘Voice Hub’ is being used across sales, service and retention, with voice AI agents now originating 15% of direct personal loan business and carrying out 90% of welcome calls. Moreover, AI-driven credit assessments now assist underwriting for 80% of the small business portfolio, leading to shorter decision cycles and lifting credit manager productivity by 30%.

AI impact on business

The company reported a consolidated net profit of ₹1,502 crore in the three months through March, up 43% from the same period last year. Its total loan book was at ₹2.7 trillion as on 31 March, up 21% from the previous year.

Tata Capital is not the first NBFC to announce that AI has had an impact on its business. In February, Rajeev Jain, vice-chairman and managing director, Bajaj Finance said that AI listened to 20 million calls and converted voice to text. It said that text-to-data conversion happened for 520,000 customers, and as a result, the lender generated 100,000 new offers for which it did not have information earlier.

Sabharwal of Tata Capital said the lender did not find much impact of the West Asia war on its clients. “When we talk to clients who are there in the SME (small and medium enterprise) or the large corporate side, they have stocks of raw materials which is helping them tide over this situation. Similarly, they are saying that raw material is available and they are able to produce,” said Sabharwal.

He said that there has been some impact on cost structures of its customers, but as most of them are saying that they are able to pass this on and nobody has spoken about any significant disruption in any way.

“We feel that we should be more careful in certain parts of the MSME (micro, small and medium enterprise) business and this is where our messaging to our credit team is that you should look at some segments within the MSME and try to understand more from the working capital cycle at this point of time.”