Now Reading: PM panel paper sees AI driving next banking efficiency phase
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PM panel paper sees AI driving next banking efficiency phase
Artificial intelligence and machine learning could drive the next phase of efficiency and productivity gains in India's banking sector, according to a working paper by the Economic Advisory Council to the Prime…
Artificial intelligence and machine learning could drive the next phase of efficiency and productivity gains in India's banking sector, according to a working paper by the Economic Advisory Council to the Prime Minister (EAC-PM). The paper notes that after a decade of digitalisation and technology upgrades, banks may now move towards greater use of AI, including hyper-personalisation of products for younger customers and the emergence of more autonomous, self-optimising banking ecosystems.
The study uses Data Envelopment Analysis to measure banking efficiency and productivity over the past decade, while its discussion of AI focuses on potential future direction rather than measuring the impact of existing AI deployments on individual banks. The technology frontier reached 1.0087 in FY26, indicating a marginal positive shift in technological progress. The paper identifies AI and machine learning as potential contributors to the next phase of advancement, but does not establish that AI has already driven measured efficiency improvements.
Indian Opinion Analysis
The EAC-PM paper frames AI as a future driver rather than an existing one because India's banking sector is still early in its AI adoption cycle, with most lenders using machine learning for fraud detection and credit scoring but not yet for full-scale autonomous operations. The shift from digitalisation to cognitive banking would require significant investment in data infrastructure, regulatory clarity from the RBI on AI governance, and workforce reskilling. The technology frontier measure of 1.0087 reflects the sector's incremental progress, a sustained move above 1.02 would signal the kind of breakthrough the paper anticipates. The RBI's upcoming framework on responsible AI in financial services, expected later this year, will be the key indicator of whether the enabling conditions for this next phase are falling into place.
Source: bfsi.economictimes.indiatimes.com
This brief was synthesised by AI from the source linked above.
