Indian Banks Embrace AI and Digital Transformation Amid Growth Prospects

Indian Banking Sector's Positive Outlook

New Delhi, March 13: A recent report highlights that Indian banks are experiencing growth due to consistent credit expansion, enhanced digital public infrastructure, and the swift integration of AI-driven operational models. Additionally, there is an increased regulatory emphasis on climate risk, cyber resilience, and governance.

The analysis from KPMG International indicates that the banking sector is aligning with global standards, transitioning from pilot projects to full-scale AI implementation, while also focusing on workforce reskilling and bolstering cybersecurity and ESG frameworks for sustainable growth.

According to a survey involving 110 CEOs from global Banking and Capital Markets, 83% expressed confidence in growth over the next three years, with 65% identifying AI as a primary investment focus.

Approximately 70% of CEOs plan to dedicate 10–20% of their budgets for the next year to AI initiatives, while 59% anticipate that agentic AI will significantly transform their operations, and 69% expect to see returns within one to three years.

"About 83% of banking and capital market CEOs are emphasizing the need for reskilling in AI; 79% believe AI has changed the skills required for entry-level positions, and 78% caution that a lack of AI workforce readiness could adversely affect their organizations," the report noted.

“As global banking leaders tackle increasing operational and regulatory expenses through scaling and strategic mergers and acquisitions, this trend is also influencing the Indian banking landscape,” stated Sanjay Doshi, Partner and Head of Transaction Services and Financial Services Advisory at KPMG in India.

Doshi emphasized that for India, scale transcends mere size; it serves as a catalyst for broadening distribution, expediting digital transformation, and improving cost efficiency.

As banks enhance their technological investments and modernize their operational frameworks, selective consolidation and growth through partnerships can open new markets, strengthen value propositions, and foster long-term competitive resilience, he added.

About 86% of CEOs identified cyber insecurity as the primary threat to growth, while 56% pointed to ethical dilemmas, and 55% highlighted issues related to data readiness and regulatory compliance.