“Banks Need an AI Makeover to Power India’s ‘Viksit Bharat’ Ambition: Report”

India’s banking sector must fundamentally redesign operating models around artificial intelligence while sustaining asset growth at nearly 3.5–4 percentage points faster than nominal GDP to support the country’s Viksit Bharat goals, a report said on Tuesday. The report from Boston Consulting Group, in association with the Federation of Indian Chambers of Commerce and Industry and the Indian Banks' Association said India’s banking return on equity (ROE) places it among the top performing countries leading to the recent flux of FDI in the sector.

After a decade in which bank advances largely tracked nominal GDP growth, the sector has begun to outpace GDP growth, creating the momentum to achieve its $30 trillion economy backed by about $45 trillion in banking assets by 2047. In order to leverage that opportunity banks have to move beyond digitisation and focus on three strategic imperatives: "democratise credit affordability, unlock productivity and build risk muscle beyond credit," the report said.

Access to formal credit has expanded significantly, with retail bureau coverage increasing from 45.5 crore to 78.9 crore borrowers, while MSME bureau coverage doubled from 2 crore to 3.9 crore borrowers over the past five years, the report noted. Operating and collection costs together account for 40-50 per cent of the cost to serve, making affordability a greater challenge than credit risk particularly for small-ticket retail products. AI-enabled lending journeys can automate document processing, underwriting and collections, helping reduce processing costs and improve customer experience.

Despite a decade of digitization, banks have seen limited productivity gains, with cost- to-income ratios remaining elevated and technology investments continuing to rise. AI can reshape banking operations by automating complex, unstructured work and enabling employees to focus on higher-value activities across technology, HR and customer advisory functions.

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