Cloud and AI-ML dominate tech adoption in Indian banks: RBI Survey

The central bank’s findings underscore the need for strong governance and strategic investments to sustainably integrate emerging technologies into India’s financial ecosystem

Indian banks are increasingly turning to advanced technologies like cloud computing and artificial intelligence/machine learning (AI/ML), according to a recent Reserve Bank of India (RBI) survey. Conducted in November 2024, the survey assessed how 12 state-owned and 19 private sector banks are adopting these innovations while managing risks to the financial sector.

Findings in RBI’s latest Financial Stability Report show that AI/ML is predominantly utilized in customer service, sales and marketing, risk management, and know-your-customer (KYC) processes. These technologies enable banks to deliver personalized services, improve operational efficiency, and enhance compliance. Meanwhile, cloud computing facilitates cost reduction by providing scalable infrastructure and enabling economies of scale.

Outsourcing has emerged as a significant trend, with over 80% of surveyed banks relying fully or partially on external providers for implementing at least one emerging technology. This approach appears to stem from a focus on leveraging specialized IT expertise and maintaining cost efficiency, allowing internal teams to concentrate on core banking operations.

However, despite the transformative potential of these technologies, the survey revealed limited financial commitment. A notable 61% of banks allocated less than 10% of their information technology budgets to emerging technologies in the current financial year. This conservative spending highlights the cautious approach banks are taking, balancing innovation with resource constraints.

The RBI emphasized that while emerging technologies present significant opportunities for the banking sector, they also pose risks, including cybersecurity threats and dependency on third-party providers. The central bank’s findings underscore the need for robust governance frameworks and strategic investments to ensure sustainable integration of these technologies into India’s financial ecosystem.

The survey serves as a critical benchmark for understanding the evolving role of technology in the financial sector and its implications for future innovation and stability.