Leveraging AI in Finance as a Catalyst for Improving Financial Literacy and Reducing NPAs

Abstract

Purpose: This study explores how artificial intelligence (AI) can serve as a catalyst for enhancing financial literacy and indirectly reducing Non-Performing Assets (NPAs) across diverse populations. Financial literacy is essential for informed decision-making, yet many individuals lack the knowledge required to navigate complex financial landscapes, leading to poor credit practices and rising NPAs. AI technologies—such as chatbots, personalized learning platforms, and predictive analytics—offer innovative solutions to address these challenges. Methodology: The study employs secondary data analysis, reviewing existing literature, industry reports, and academic studies that evaluate the effectiveness of AI-driven tools in financial education. Case studies from organizations implementing AI-based financial literacy initiatives are analyzed to assess their outcomes. Research Gap: Although AI is increasingly used in finance, limited research explores its combined impact on financial literacy and NPA reduction, particularly regarding user behavior, accessibility, ethics, and scalable implementation across diverse populations. Findings: Results indicate that AI-enabled tools significantly improve financial literacy, leading to better decision-making, enhanced credit awareness, and improved repayment discipline, which in turn helps curb NPAs. Users reported stronger understanding of financial concepts, increased confidence in managing finances, and greater engagement with financial content. Implementation: AI can be integrated into financial services through chatbots for customer support, gamified financial education apps, predictive analytics for risk assessment, and robo-advisory services. Collaboration between financial institutions, educators, and policymakers is necessary for widespread adoption. Conclusion: Leveraging AI in finance enhances financial literacy, promotes responsible borrowing, and reduces NPA risks. Future research should explore scalability, long-term impacts, and the ethical considerations of AI adoption in financial literacy programs.