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ARTIFICIAL INTELLIGENCE BASED GREEN CREDIT SCORING MODELS AND SUSTAINABLE LENDING DECISION IN THE KERALA BANKS.
ARTIFICIAL INTELLIGENCE BASED GREEN CREDIT SCORING MODELS AND SUSTAINABLE LENDING DECISION IN THE KERALA BANKS.
Mekha Sebastian,
Assistant Professor,
Department of Commerce,
Rajagiri College of Management and Applied Sciences Kakkanad,682039
Email ID: mekhasebastian94@gmail.com
Dr. R Aruljothi,
Assistant Professor,
Department of Commerce,
Karpagam Academy of Higher Education, Coimbatore-641021,
Email ID: aruljothi.rangasamy@kahedu.edu.in
Abstract
The incorporation of the Artificial Intelligence (AI) in the banking credit-assessment systems is transforming the financial risk assessment and portfolio-management behavior (Davenport and Ronanki, 2018). At the same time, the increased regulatory and stakeholder emphasis on the Environmental, Social, and Governance (ESG) models is pushing lending policies in the direction of the sustainability-focused capital allocation (Fatemi and Fooladi, 2013; Friede et al., 2015). Although there is a growing application of AI-based credit-scoring methods, there is also still very little empirical data on how AI operationalises the ESG parameters to improve sustainable lending behaviour, especially in regional banking systems of the emerging economies.
The research question explored in the current paper is what the correlation between AI adoption is, ESG integration, and sustainable lending performance in banks service the Ernakulam district in Kerala. The quantitative, cross-sectional research design was used, where 150 banking professionals. The mediation analysis through regression was one of the methods that were employed to analysis the data using descriptive statistics, Pearson correlation analysis, multiple regression, and a regression-based mediation analysis.
The results indicate that the use of AI has a strong impact on the ESG integration and sustainable lending performance. The impact of incorporating ESG is positive and important regarding sustainable lending. The mediation analysis validates that the ESG integration is a mediating element between the use of AI and sustainable lending performance, which suggests that the technological capability is converted to sustainability results by a set of governance embedding mechanisms.
Keywords: Artificial Intelligence, ESG Integration, Green credit scoring, sustainable lending, sustainable Finance, Kerala Banking Sector.
