Indian Banks Must Make AI A Core Strategy As Credit Growth, Productivity And Risk Demands Rise: FICCI

Indian banks will need to shift artificial intelligence (AI) from isolated pilots to the centre of their operating strategy if they are to support India's Viksit Bharat ambitions, according to the report released by FICCI, Indian Banks' Association (IBA), and Boston Consulting Group (BCG).

Titled 'Winning in the AI Era: The New Playbook for Indian Banks', the report said banking assets must continue expanding around 3.5-4 percentage points faster than nominal GDP. Sustaining such growth would be critical to supporting India's goal of becoming a $30 trillion economy with roughly $45 trillion in banking assets by 2047.

According to the report, India's banking sector is entering this phase from a relatively strong position, supported by low NPAs, solid capitalisation and improving returns.

It noted that banking asset growth outpaced nominal GDP growth by 3.5 percentage points last year, marking progress towards the pace required for the country's long-term economic ambitions.

AI Beyond Digitisation

The report said the benefits from the previous decade of digitisation have not translated into the expected productivity gains. Cost-to-income ratios remain high, branch networks continue to expand and technology spending has increased.

AI and generative AI could help banks break these structural cost barriers by automating complex and unstructured tasks, rather than merely digitising existing workflows.

The report identified three strategic priorities: democratising credit affordability, unlocking productivity and building risk muscle beyond credit.

On lending, the report said operating and collection expenses account for 40-50% of the total cost of serving credit. AI-enabled journeys could automate document processing, underwriting and collections, potentially lowering costs, particularly for small-ticket retail loans, it said.

Productivity And New Risks

Banks can also use AI to reshape functions such as technology, HR and customer advisory, but scaling the technology will require leadership commitment, workforce upskilling, stronger data and infrastructure, and robust governance, the FIBAC 2026 report.

It also called for greater focus on fraud, cybersecurity, operational resilience, geopolitical and climate risks.

Cyber attacks are becoming faster and cheaper to launch, while rising digital interdependence is widening the potential attack surface, the report said, adding that banks must move towards machine-speed defence.

"Indian banking is one of the best-performing sectors globally on the metrics that matter, with improving valuations and returns on equity well above the cost of capital," said Ruchin Goyal, Managing Director at BCG.

"AI presents an enormous opportunity to completely reimagine underlying processes, bring down the operating cost of credit, unlock productivity, and enable human beings, supported by AI, to make faster and more precise decisions," he added.

The report said success will ultimately depend on banks redesigning their operating models around AI while strengthening resilience to support two decades of sustained expansion.