By Siddhesh Naik
The Indian financial services industry is on the threshold of a new phase of revolutionary transformation. Just as cloud computing once reshaped the sector, artificial intelligence (AI) has now emerged as the latest catalyst for change. As the industry continues to navigate the complexities of economic transformation, increasing competition from new entrants, and an ever-evolving regulatory landscape, AI stands out as a key enabler for growth. The question on everyone’s mind is: which banks will lead the charge in harnessing the power of AI to drive better productivity, innovation, and customer experience?
The 2025 Global Outlook for Banking and Financial Markets report by the IBM Institute for Business Value found that more than 60% of financial services CEOs are willing to take substantial risks to harness the advantages of advanced AI and automation, but few have a clear strategy in place. In 2024, only 8% of banks were leveraging AI strategically across the enterprise, while 78% were taking a more tactical approach, experimenting with AI in isolated pockets.
While this experimentation phase is a good starting point, to truly unlock AI’s potential, banks must move beyond it and adopt a comprehensive strategy that aligns AI integration with their long-term objectives. This requires a fundamental shift in mindset—from seeing AI as a tool to enhance existing processes, to recognising it as a partner that can reimagine and transform the entire business.
So, what should bank leaders do to lead this change?
The first step towards transformation is to integrate AI into the core business strategy. This involves understanding what the bank aims to achieve over the next few years and ensuring technological investments are aligned with those priorities to deliver tangible outcomes. Business goals and technological innovation must drive each other in a virtuous loop, reinventing the future of banking.
The next step is to work with AI, not against it. When deployed correctly, AI can optimise and reimagine existing processes, driving unprecedented efficiency and innovation. By embracing AI as a partner, banks can unlock new avenues for growth and development. This approach demands a mindset shift—from viewing AI as a threat to traditional banking methods to recognising it as an enabler of opportunity and improved operational efficiency. A compelling example would be the adoption of next-generation AI agents and assistants that can significantly boost the productivity of banking employees.
Finally, banks must strike a balance between caution and innovation, especially in a highly regulated industry. As AI systems become more sophisticated, they can also become harder to understand and manage—especially when operating within agentic frameworks that allow for greater autonomy. Implementing responsible AI through clear, end-to-end governance is crucial to ensure security, compliance, and resilience as innovation scales. This balance will allow banks to reap the benefits of AI without compromising safety and regulatory standards.
According to estimates by IDC, AI spending in India could grow at 2.2 times the rate of overall digital technology spending over the next three years. Considering the BFSI sector has traditionally led technology adoption in India, this is promising news. However, banks must ensure they are not investing in AI merely to check a box. The key is to start small, take action, and iterate. Progress begins with the first step—and launching that initial AI project is critical for building momentum. Like a snowball, once the journey begins, the impact can grow exponentially.
The future of banking belongs to those who dare to begin, raise their ambitions, and let responsible innovation lead the way.
The time to act is now.
(Siddhesh Naik, Country Leader, Data & AI Software, IBM India & South Asia.)
Views are personal and do not represent the stand of this publication.
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