Mumbai: A recent analysis from the Boston Consulting Group (BCG) says that the Indian banking sector will undergo a big change, even though many people are worried about how artificial intelligence may affect jobs. The paper says that AI might “reshape” as many as half of the occupations in the industry. This could be the key to improving productivity and efficiency.
Senior partner Ruchin Goyal gave the results at the yearly FIBAC event. He pointed out a big problem that Indian banks are having: even though they’ve spent almost five times as much on technology in the last ten years, their productivity has only gone up by 1%. This has put Indian banks behind their global peers and made it hard for them to deal with “sticky cost structures.”
Goyal added, “We think that about 35–50% of jobs can be changed if banks are brave enough to use these new technologies.” He stressed that this change in technology is not an option but a must if the banking industry wants to solve its long-standing productivity problems. The paper says that banks can get past their existing problems and start a new era of efficiency by using AI.
The number of jobs in India’s formal sector is already starting to slow down, and certain sectors, like IT, are laying off workers as corporations use technology to automate tasks. In banking, a similar trend can be seen: many lenders are deciding not to hire new personnel since new technology are making some jobs unnecessary. Goyal also said that even while tech spending is going up, Indian banks are still spending less on tech than banks in other countries. This means that this trend is likely to continue.
The research also talked about other big problems that the banking system has, especially when it comes to helping India reach its objective of being a developed country by 2047. It said that the “Viksit Bharat” mission could only be achieved if banking assets grew faster than nominal GDP by 3 to 3.5 percentage points.
The report also mentioned a troubling trend in retail lending: the number of “new-to-credit” consumers has been dropping by roughly 2% per year. Goyal says that barely a third of India’s more than 100 crore adults have a credit history. This poor pace of credit inclusion could be a big problem for future growth.
The BCG analysis makes it clear that the shift to AI-driven banking may change the workforce, but it is necessary for Indian banks to stay competitive and become a real engine of the country’s economic growth.