India's banking sector must fundamentally redesign its operating models around artificial intelligence and sustain asset growth at 3.5–4 percentage points faster than nominal GDP to support the country's Viksit Bharat ambitions, according to a report released on Tuesday, 11 August 2025. The findings come from a joint study by Boston Consulting Group (BCG), the Federation of Indian Chambers of Commerce and Industry (FICCI), and the Indian Banks' Association (IBA).

Banking's Strategic Imperative

The report identifies three core priorities for Indian banks moving forward: democratising credit affordability, unlocking productivity, and building risk capabilities beyond conventional credit assessment. After a decade in which bank advances largely tracked nominal GDP growth, the sector has begun to outpace it — creating the momentum required to help India realise a $30 trillion economy backed by approximately $45 trillion in banking assets by 2047.

India's banking return on equity (ROE) already places it among the world's top-performing markets, a factor the report credits with driving the recent surge in foreign direct investment into the sector.

Credit Access Has Widened, But Costs Remain High

Formal credit access has expanded considerably over the past five years. Retail bureau coverage has grown from 45.5 crore to 78.9 crore borrowers, while MSME bureau coverage has nearly doubled — from 2 crore to 3.9 crore borrowers. Despite this progress, the report warns that operating and collection costs together account for 40–50 per cent of the cost to serve, making affordability a more pressing challenge than credit risk itself, particularly for small-ticket retail products.

Where AI Fits In

AI-enabled lending journeys, the report argues, can automate document processing, underwriting, and collections — reducing processing costs while improving the customer experience. Crucially, the gains extend beyond front-end digitisation. AI can reshape back-office operations by handling complex, unstructured work, freeing employees to focus on higher-value functions across technology, human resources, and customer advisory roles.

Notably, despite a decade of digitisation investment, Indian banks have seen limited productivity gains, with cost-to-income ratios remaining elevated even as technology budgets have climbed. The report positions AI not as an add-on but as the structural redesign required to break that pattern.

What This Means for Viksit Bharat

The Viksit Bharat vision — India's ambition to become a developed economy by 2047, the centenary of independence — places enormous demands on financial intermediation. Sustaining the asset growth trajectory outlined in the report would require banks to consistently outperform GDP over the next two decades, a task that hinges on both scale and efficiency. The BCG-FICCI-IBA findings suggest that without a decisive AI pivot, the sector risks falling short of the financing volumes that a $30 trillion economy would require.

Industry observers note this is not the first time Indian banking has been called to reinvent itself — the Non-Performing Asset (NPA) crisis of the 2010s forced a painful clean-up, and the current digitisation wave has yet to fully translate into cost savings. The AI imperative, if acted upon, could mark a third structural shift for the sector.