L&T Finance is intensifying its use of artificial intelligence to reduce credit costs while rapidly expanding its gold loan operations, as noted by Managing Director and Chief Executive Officer Sudipta Roy in a recent interview with CNBC TV18. Roy elaborated on the firm’s multi-faceted strategy aimed at fostering sustainable growth and enhancing profitability, emphasizing a commitment to being a “risk first, tech first” financial institution.
A pivotal aspect of this strategy is the widespread implementation of AI across various operational areas, including onboarding, underwriting, servicing, and collections. Roy pointed to the success of ‘Cyclops’, a deep learning-based underwriting engine, which has significantly improved performance in the two-wheeler loan sector. “In exactly 20 months of running… our portfolio bounce is down to about below 15%,” Roy remarked, highlighting a notable decrease from the industry average of 23-24%.
This implementation has effectively reduced approximately 150 basis points from portfolio risk. While the company invested ₹80 crore to develop the tool, the long-term advantages are projected to be considerable, potentially saving around 200 basis points by cutting both credit costs and administrative expenses. AI is further being utilized in collections, where the cost of an automated call is ₹38, compared to ₹600-₹900 for a human call.
Turning to the microfinance sector, which accounts for about 26% of L&T Finance’s loan portfolio, Roy expressed optimism about its recovery. He noted that disbursements have consistently exceeded ₹2,000 crore in recent months, with collection efficiency improving to 99.57% last month. Even in Karnataka, a state that previously struggled, collection efficiency has improved to 99.4%. Roy believes the industry is “out of the woods,” anticipating a stronger second half of the fiscal year, contingent upon improved liquidity conditions.
The company is also aggressively pursuing growth in the gold loan market. Currently possessing a loan book of ₹1,500 crore, L&T Finance aims to expand this significantly. “We are adding 200 branches this year, we’ll add 300 to 350 branches next year… we’ll be opening one gold loan branch every day,” Roy stated. The goal is to scale the gold loan book to between ₹4,500 crore and ₹5,000 crore by the end of fiscal year 2027.
These strategic efforts are part of the company’s “Lakshya 2026” objectives. Roy reaffirmed the target for a return on assets (ROA) between 2.8% and 3% by March 2027, up from the current rate of 2.41%. A significant contributor to this goal will be the anticipated reduction of credit costs, expected to approach 2%. He also confirmed that the company is on track for an asset under management (AUM) growth rate of 20-25% this year, which he described as a “safe speed” for retail lending operations.
Regarding capital, Roy emphasized that L&T Finance is well-capitalized and does not currently seek new equity partners, citing strong support from its parent company. “Our focus is on execution, execution, and execution,” he concluded, indicating the firm’s commitment to its strategic growth initiatives.
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