India is at a critical inflection point in its development trajectory. Over the next twenty years, it has a unique window to leverage its scale and momentum to build lasting global leadership. Realizing the ‘Viksit Bharat' Mission will hinge on the evolution of a robust, innovative, and resilient banking and financial sector, capable of supporting India’s aspirations for sustainable, inclusive growth.
This report, developed in association with FICCI and IBA and launched at FIBAC 2025, highlights that the Indian banking industry is poised for leadership – it is profitable, well capitalized and highly valued. To seize this opportunity, banks must chart new frontiers. There are 4 key themes -
- Unlocking growth: Shape of bank advances has changed significantly over the last 15 years. Corporate funding has shifted towards capital markets and alternate avenues such as private credit. Banks need to play a more active role in funding the new capex required for Viksit Bharat to become a reality. Financial inclusion efforts, particularly on MSME lending, show promise. Lenders must also embrace the full power of data (including alternate data) and AI to manage and measure emerging risks such as fraud and climate.
- Driving productivity: Despite a decade of digitization, productivity gains have been limited, averaging only 1% annually over the past 15 years. AI/GenAI promises transformational capabilities. With mature deployment, 35–40% of current low value activities can be automated. Realizing this potential requires a clear AI/GenAI strategy, modular architecture, strong governance frameworks for ethical AI, change management and significant reskilling of staff.
- Digital maturity: India’s Digital Public Infrastructure (DPI) has been a game changer, delivering inclusion, access, efficiency and customer experience. However, banks’ digital journeys still involve friction and adoption challenges. Seamless journeys and personalization are essential. DPI 2.0, with consent management and lending use cases, must be designed to enable frictionless transactions as effectively as DPI 1.0. ULI has the potential to create a UPI-like explosion in lending.
- Embedding resilience: Banks must go beyond credit risk to manage emerging macro risks including climate, cyber and geopolitical risks. Building shared capabilities to measure, monitor and mitigate these risks will be critical.
In summary, India’s banking sector, while well-positioned, must accelerate transformation to meet Viksit Bharat ambitions. Success will be shaped by progress across four domains: expanding into untapped credit segments, unlocking productivity with AI/GenAI, delivering world-class digital experiences, and embedding a deep risk culture. Only then can banks become the driving force behind India’s economic rise.