The government is looking to make it mandatory for resolution professionals to use Artificial Intelligence (AI) agents in the insolvency process for greater efficiency, transparency, and accuracy.
According to a report from the Insolvency and Bankruptcy Board of India (IBBI), “By leveraging AI tools, India can address challenges such as delayed resolutions, fraudulent activities, and the overwhelming volume of financial data that professionals must analyse.”
Mandating AI adoption will enable resolution professionals to streamline compliance, automate documentation, detect anomalies, and improve stakeholder communication, the board added.
Unlocking advanced AI use cases beyond legal research
Even though the insolvency professionals are already leveraging AI applications like ChatGPT, their use of AI tools is restricted to summarising legal judgments and to aid in enhancing legal research. However, a large number of AI use cases still remain unexplored.
Through the report, the IBBI has outlined a bunch of AI agents that can have different purposes. For instance, specialised fraud detection AI agents can identify potential fraud such as preferential, undervalued, fraudulent, and extortionate (PUFE) transactions, concealed assets, or other irregularities in financial records.
Similarly, insolvency prediction agents can be leveraged to forecast recovery outcomes. “Using advanced AI models, these agents analyse historical insolvency data, financial records, and case-specific variables to predict creditor recovery rates and timelines.Additionally, prediction agents can model various insolvency scenarios, such as asset liquidation or restructuring plans, and evaluate their outcomes,” the report said.
Global precedent and efficiency gains in the IBC
Experts said that there could be significant efficiency benefits that can be derived from introducing AI agents in the IBC process, especially when it comes to review of information and documents. “Millions of documents can be scanned quickly to check for filtering out false claims leading to faster process timings all the way up to e-auctions which themselves can be benefitted by automated price settings emerging through optimised algorithms,” said Ricky Chopra, chairman & chief counsel, RCIC.
Many countries are actively integrating AI into their insolvency processes. The UK launched its “National AI Strategy” in 2021 with an aim to establish a comprehensive framework for AI governance. This initiative explicitly supported the use of AI in law enforcement, including insolvency-related matters. Further, Finland utilises the KOSTI platform to improve efficiencies in insolvency cases.