Even as concerns are being raised over artificial intelligence taking over jobs, a consultancy firm has said the adoption of technology can "reshape" half the roles in Indian banking sector.

According to Boston Consulting Group (BCG), Indian banks have made a nearly five-times increase in information technology spending over the last decade but their productivity gains have been limited. 

Estimating actual productivity gains at just 1% for Indian banks, the consulting firm said that lenders from India trail their global peers.

What can speed up productivity gains is the usage of AI and many banks have started adopting such tools.

"We feel that about 35-50% of jobs can get reshaped if banks are able to boldly embrace these new technologies, and that will be a prerequisite if the banking sector has to break the sticky cost structures that they've been encountering over the last few years," BCG senior partner Ruchin Goyal said while speaking at the annual FIBAC event on Monday.

Formal sector jobs are facing challenges from the adoption of AI and layoffs have started in some sectors like information technology (IT).

In the banking sector, there has been a decline in the net headcount growth or a reduction in the overall employee base as well, as many lenders prefer not to replace roles with newer hires due to the advent of technology.

Indian banks will continue to increase their spends on technology as this even at the elevated levels is lower than their global peers, Goyal said.

With a compounded annual growth rate of 17.4%, IT cost leads the pack on a jump in operating expenses over the decade to FY25, followed by non-employee operating expense at 13.2% and general operating expenses at 11.7%.

The report also noted other challenges, including the growth rate in bank credit needed for powering India into a developed nation by 2047.

"Banking assets growth must outpace nominal GDP growth by 3-3.5 percentage points to power Viksit Bharat mission," the report said.

Credit growth moderated to 12% in FY25 versus a 9.8% rise in the nominal GDP.

According to the BCG report, the share of new-to-credit customers in retail lending has continued to decline at about 2% per annum.

Only a third of the over 100 crore Indian adults have records with credit information companies, and it will take a very long time if the additions are just 2-3%, Goyal cautioned.