Indian banks race to scale GenAI as adoption jumps to 86%: BCG-FICCI-IBA

Indian banks are rapidly moving Generative Artificial Intelligence (GenAI) from experimentation towards mainstream adoption, with the share of lenders having GenAI use cases under implementation rising to 86% in 2026 from 44% in 2025 and just 10% in 2024, according to a new report by Boston Consulting Group (BCG), FICCI and the Indian Banks’ Association (IBA). The report, however, says scaling the technology across the banking system will require changes in operating models, talent, infrastructure and governance.

The report, Winning in the AI Era: The New Playbook for Indian Banks, comes as the banking sector enters a period of stronger credit growth. Banking assets grew 3.5 percentage points faster than nominal GDP in the latest year, but the report says lenders will need to sustain a 3.5-4 percentage point outperformance over nominal GDP to support the country’s ambition of becoming a $30 trillion economy with around $45 trillion in banking assets by 2047.

Credit access widens, but cost remains a hurdle

The report identifies credit affordability as one of three priorities for Indian banks in the AI era. Retail bureau coverage expanded from 45.5 crore borrowers in 2021 to 78.9 crore in 2026, while the MSME bureau footprint nearly doubled from 2 crore to 3.9 crore during the period. Yet the cost of serving borrowers remains a significant constraint.

Operating and collection expenses account for 40-50% of the total cost to serve, making the economics of small-ticket retail credit particularly challenging. The report says AI-enabled lending journeys could automate document processing, underwriting and collections, helping lenders reduce processing costs.

From digitisation to AI-led productivity

The report argues that the benefits of the previous decade’s digitisation have not translated into commensurate productivity gains. Cost-to-income ratios remain elevated even as banks continue to increase technology spending. AI, particularly agentic AI, could change that by handling complex and unstructured tasks and allowing employees to concentrate on higher-value decisions and customer relationships.

However, data and infrastructure readiness, talent and skills shortages, regulatory and governance concerns and uncertainty over returns remain key barriers to wider AI deployment.

Risk expands beyond traditional credit

The report also calls on banks to strengthen capabilities around fraud, cybersecurity, operational resilience, geopolitical shocks and climate risks. It estimates that Indian MSMEs have so far remained resilient to geopolitical stress, but warns that if such stress remains unresolved for another six months, MSME slippage rates could rise 1.5-2 times.

“AI presents an enormous opportunity to completely reimagine underlying processes, bring down the operating cost of credit, unlock productivity, and enable human beings, supported by AI, to make faster and more precise decisions,” said Ruchin Goyal, Managing Director and Senior Partner, BCG.