AI Set to Replace Half of Indian Bank Jobs: BCG Report Reveals

A transformative wave of artificial intelligence (AI) is poised to reshape 35-50% of jobs in India’s banking sector, according to a report by Boston Consulting Group (BCG) released on Monday at the annual Fibac event. The consultancy highlighted that despite a nearly fivefold increase in information technology spending over the past decade, Indian banks have achieved only a modest 1% gain in productivity, trailing their global counterparts. The adoption of AI is seen as a critical solution to address this challenge and break the sector’s persistent high-cost structures.

Ruchin Goyal, BCG’s senior partner, emphasized the urgency for banks to embrace AI technologies boldly. “If banks are to overcome sticky cost structures, reshaping 35-50% of roles through AI will be a prerequisite,” Goyal stated. The report comes amid growing concerns about AI’s impact on formal sector employment, with Indian banks already witnessing a decline in net headcount growth as many opt not to replace roles, leveraging technology to streamline operations.

The report noted that IT expenditure in Indian banks has grown at a compounded annual rate of 17.4% over the decade to FY25, outpacing non-employee operating expenses (13.2%) and general operating expenses (11.7%). Despite this, tech spending remains lower than global benchmarks, and further increases are anticipated to align with international standards. However, the limited productivity gains underscore the need for strategic AI integration to enhance efficiency and competitiveness.

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The BCG report also outlined broader challenges for India’s banking sector in supporting the nation’s ambition to become a developed economy by 2047 under the Viksit Bharat mission. It stressed that banking assets must grow 3-3.5 percentage points faster than nominal GDP, which rose by 9.8% in FY25 compared to a 12% credit growth. Additionally, the report flagged a concerning decline in new-to-credit customers in retail lending, dropping by about 2% annually. With only one-third of India’s over 100 crore adults registered with credit information companies, Goyal warned that the current pace of 2-3% annual additions is insufficient to meet long-term financial inclusion goals.

As AI continues to reshape the banking landscape, the report underscores the dual challenge of leveraging technology to boost productivity while addressing workforce transitions and ensuring inclusive credit growth to power India’s economic aspirations.

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