The government is considering making it mandatory for resolution professionals to deploy Artificial Intelligence (AI) agents in the insolvency process to enhance efficiency, transparency, and accuracy.

According to a report by the Insolvency and Bankruptcy Board of India (IBBI), the adoption of AI could help tackle persistent challenges such as delayed resolutions, fraudulent activities, and the massive 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.

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.