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The Role of Early Warning Systems (EWS) in the Indian Banking Scenario

Here's a Deep Dive into the Indian Banking Sector to Understand the Importance of EWS

"Gross NPAs of public sector banks doubled in last seven years, SBI tops the list," the title published in Times of India went viral soon it went online on December 16, 2021.

As per the reports, the public sector banks had a cumulative figure of Rs. 5.40 lakh crore in 2021 – a massive hike or a double from Rs. 2.24 lakh crore in 2014.

These figures raise red flags about the Indian banking systems and their risk assessment philosophies. This is where a structured system, an EWS System, comes in place.

So What Exactly Is EWS And How Does It Function?

EWS stands for Early Warning Signals. The system assesses a loan application on a critical number of factors and provides a report. This, in turn, helps banks decide whether to lend or not.

To take a step further, the system supplements the practice of due diligence in loan disbursal and credit defaults that primarily constituted the contributing factors to many frauds.

These systems also use artificial intelligence and double down their effectiveness with the help of advanced algorithms that make them dependable.

Following are the utilities of an EWS System in financial ecosystems.

Utilities of an EWS in the Financial Ecosystem

Securitization of Assets

Securitization of assets has always been a matter of conflict for banks. To a certain extent and without the aid of automated systems, banks lose sight of the loans and hence need systematic assistance.

With EWS in place, banks get suggestions about bad loans that need immediate attention. For example, post several warnings if an individual is unable to clear dues, or an agreement is inconclusive, the bank owns right to sell the assets to recover investments. EWSs identify such cases in real-time and suggest steps to prevent bad loans.

Reducing Probability of Customer Defaults

A majority of signs of loan defaults are visible at the initial stages themselves. Thus, these factors can be assessed in infancy while saving the banks from a bad loan.

However, a majority of loans default in mid-way as well. Legacy systems fail to identify these gaps, and hence the bad loans rise dramatically. EWS system uses advanced indicators and triggers that identify bad loans in real-time and hence cannot be ignored at all costs.

Identification of Opportunities and Business Patterns

AI-based EWS can further track businesses that are performing in their industries. This gives them insights into sectors that are investible and aid them in finding better opportunities. This goes a step forward from systems that identify bad loans only.


While there are innumerable ways an EWS system can assist the banks, these are the system's core functionalities. The AI-driven EWS system from the house of D2K Technologies is one of the brightest examples of how things operate in major banks of India. These solutions outline every possible parameter and scenario and hence, cannot be ignored at all costs.


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