AI Can Reshape Half Of Roles In Indian Banking: Report

Amid concerns over artificial intelligence's impact on jobs, a consultancy firm on Monday said the adoption of the technology can 'reshape' half of the roles in the Indian banking sector.

In what may come as a concerning outcome for banks, Boston Consulting Group said that despite a nearly five-times increase in information technology spending of banks over the last decade, the gains in productivity are limited.

The firm pegged the actual productivity gains at just 1% for Indian banks, and added that lenders from the country trail their global peers.

AI adoption can help banks overcome the challenge posed by limited productivity gains, it said, adding that many banks are already adopting such tools.

"We feel that about 35-50% of jobs can get reshaped if banks are able to boldly embrace these new technologies, and that will be a prerequisite if the banking sector has to break the sticky cost structures that they've been encountering over the last few years," its senior partner Ruchin Goyal said while speaking at the annual Fibac event here.

The adoption of AI is increasingly posing challenges for formal sector jobs in the economy, and some sectors, like information technology, have had instances of layoffs as well lately. Even in the case of banks, there has been a decline in the net headcount growth or a reduction in the overall employee base as well, as many lenders prefer not to replace roles with newer hires due to the advent of technology.

Goyal said the tech spending for Indian banks will continue to go up going forward as well, because even at the elevated levels, tech expenditure is still lower than the global experience.

With a compounded annual growth rate of 17.4%, IT cost leads the pack on a jump in operating expenses over the decade to FY25, followed by non-employee operating expense at 13.2% and general operating expenses at 11.7%.

The report also flagged other challenges for India, including the growth in bank credit needed for achieving the goal of becoming a developed nation by 2047.

"Banking assets growth must outpace nominal GDP growth by 3-3.5 percentage points to power Viksit Bharat mission," the report said.

It can be noted that credit growth moderated to 12% in FY25 against a 9.8% rise in the nominal GDP.

The consultancy's report also said that the share of new-to-credit customers in retail lending has continued to decline at about 2% per annum.

Only a third of the over 100 crore Indian adults have records with credit information companies, and it will take a very long time if the additions are just 2-3%, Goyal warned.