In This Economy: Banks Wait, AI Doesn’t

On the flip side, goods and services tax collection rose by more than 16% year-on-year to Rs 2.01 lakh crore in May. This is the second straight month when GST collections crossed the Rs 2 lakh crore monthly benchmark. In April, the collections were at Rs 2.37 lakh crore.

The next big thing to watch out for is the trade deal with the US, which will take away any pending worries among exporters. The government is trying to expeditiously close the discussions and sign a deal. US Commerce Secretary Howard Lutnick said early Wednesday that a deal was in the offing in the “not too distant future”.

On to this week’s newsletter.

On the flip side, goods and services tax collection rose by more than 16% year-on-year to Rs 2.01 lakh crore in May. This is the second straight month when GST collections crossed the Rs 2 lakh crore monthly benchmark. In April, the collections were at Rs 2.37 lakh crore.

The next big thing to watch out for is the trade deal with the US, which will take away any pending worries among exporters. The government is trying to expeditiously close the discussions and sign a deal. US Commerce Secretary Howard Lutnick said early Wednesday that a deal was in the offing in the “not too distant future”.

On to this week’s newsletter.

On May 30, Mary Meeker released her AI Trends report to the public. Meeker, who is often called the Queen of the Internet, is a bit of an oracle and has predicted many of the world’s biggest internet trends since 1995.

In her report Meeker points at the fact that AI is unlike other major internet technologies which first germinated in the US and then spread around the world. ChatGPT was an overnight global success, albeit nine years after it was founded.

She points to an important fact. Much like the global space race, AI will prosper around the world because each participant country is working on it with all the resources they have. To that effect, AI leadership will beget geopolitical leadership, not vice versa.

The message is clear. Either you are good at AI or you are behind everyone else. In 2025, India broke into the list of 30 most valuable tech companies. Reliance’s Jio entered the list at number 23 with a $216 billion market valuation.

Interestingly, just a little over a week before the Meeker report, global consulting firm BCG released its own report about AI in banking. It spoke about why banks cannot sit back and let AI grow without implementing it in their business.

“Every day you delay is market share surrendered. GenAI can already customise advice at scale; soon, agentic AI will autonomously execute routine tasks from trade settlement to document review,” BCG experts said in their report on May 21.

While banking benefitted from complex structures in the past, it can no longer keep hiding behind this moat. Customers were beholden to this because, what else could they do?

AI is not only bringing down the walls. It is also defining the next leg of disruption.

“Most banks expect AI and GenAI to lower costs. But the real disruption runs deeper. AI is reshaping the very foundations of financial competition—from how trust is built to how value is delivered to who controls the customer relationship,” the BCG report said.

While BCG’s survey suggests that banks will likely spend 0.5-1% of their revenues on AI in 2025, much of this is focused on silos and not a broad-based AI push.

“Within the next few years, and certainly by the end of the decade, the banking landscape will look fundamentally different. Leaders need to be modelling what this shift means for their institutions—and defining the role they intend to play in it,” the report said.

While Indian banks are increasing their AI experiments, they still remain in the experimental stage. Real-life use cases remain limited, with only a handful of lenders truly embracing AI’s immense ability to simplify credit underwriting and customer servicing.

To its credit, the banking regulator has set up an eight-member committee to build a framework for ethical use of AI. The Reserve Bank of India has warned that regulatory and supervisory effectiveness may take a backseat if regulators do not keep pace with fast-moving developments in the space. 

• Is this the end of microfinance as we know it? I write here.

• WeWork India's IPO might have been delayed because SEBI raised concerns about poor disclosures at Embassy REITs, Agnidev reports.

• The race for India's No. 2 carmaker is wild. While Hyundai has held the spot for long, M&M and Tata Motors have been clawing their way in for the last few months. Tushar Deep Singh reports.

• SEBI is discussing the possibility of promoting internal candidates for the ED positions over the external potentials. Charu Singh reports.

• The consent framework at SEBI might be witnessing a change, as the regulator mulls changes. Shrimi Choudhary reports.

A new docuseries has just dropped on a major streaming platform! Why is this important? Last year, the RBI sought bids from production companies to create a web series on the regulator.

"The bank is desirous of creating a web series of five episodes of approximately 25-30 minutes each, which can be aired on national TV channels and/or OTT platforms, commemorating the 90-year journey of RBI," the regulator said in a bid document in July 2024. Disney Hotstar won that bid, and now the first episode is out. Want to watch the RBI's story? It's available here.

Until next week, this is Vishwanath signing off!