Artificial intelligence is reshaping the credit underwriting landscape by moving from traditional rule-based evaluations to behaviour-based assessments. This shift enables lenders to analyze patterns in bank transactions and spending habits, allowing them to identify stable borrowers even without a long credit history. The integration of alternative data, such as utility payments and digital transactions, is crucial for including underserved populations, particularly in India, where many individuals work in the informal sector. The Reserve Bank of India's 'Framework for Responsible and Ethical Enablement of Artificial Intelligence' (FREE-AI Report), released on August 13, 2025, emphasizes the need for responsible innovation in AI adoption. It highlights that approximately 20.8% of surveyed banks and non-banking financial companies (NBFCs) are using or developing AI systems, with 13.7% focusing on credit underwriting. However, challenges like high implementation costs and legal uncertainties remain. The report also advocates for principles of responsible AI, including transparency, accountability, and fairness, to ensure ethical outcomes. As AI continues to evolve, credit assessment will become more dynamic, enabling lenders to adjust limits and support based on real-time financial behaviour.