Artificial intelligence (AI) is expected to significantly impact the Indian banking sector, with the potential to reshape around 35-50% of roles. According to a report by Boston Consulting Group (BCG), despite a nearly five-fold increase in IT spending over the last decade, Indian banks have seen limited productivity gains of only 1%. This suggests that lenders in India trail behind their global peers.
The report highlights that AI adoption could lead to significant changes in job roles, with many banks already reducing their workforce or slowing down hiring due to technological advancements. However, AI can also help overcome limited productivity gains and tackle sticky cost structures that Indian banks have been facing.
Indian banks are expected to continue increasing their tech spending, which is currently lower than global banks, with IT costs growing at a compounded annual growth rate of 17.4%. The report also emphasizes the need for faster credit growth to support India's development goals, with banking assets growth required to outpace nominal GDP growth by 3-3.5 percentage points.
The adoption of AI in the banking sector can have several benefits, including improved efficiency, enhanced customer experience, and reduced costs. AI-powered tools can help banks offer more personalized services at scale and expand credit access to underserved populations by using non-traditional data sources to assess creditworthiness.
