In a recent conversation, John Varughese, CIO, Dhanlaxmi Bank, shares how he envisions the role of AI in banking in the near future. For Varughese, AI isn’t just a buzzword; it’s a structural shift in how banks will operate and serve customers. He highlights how Dhanlaxmi Bank is integrating emerging technologies into its operations, the challenges of change management, and why cloud migration isn’t always the silver bullet it’s made out to be.
AI as the new engine of banking operations
Varughese shares that Dhanlaxmi Bank is experimenting with AI-driven conversational agents for both internal and external use. Internally, these bots assist with HR and operational workflows; externally, they are being tested for customer inquiry handling. “In the first phase, they’ll take care of basic, mundane tasks. Critical queries will still be escalated to human agents,” he says, adding that over time, the bots could evolve to handle decision-making scenarios.
Varughese envisions a near future where AI-driven bots manage nearly all routine customer interactions. “Maybe one person will still handle customers who insist on speaking to a human, but 80 percent of calls can be handled by AI systems,” he observes. According to him, this transition won’t take half a decade; it’s already in motion.
The physical branches will evolve, not vanish
While digital adoption has surged, Varughese doesn’t believe the physical bank branch is headed for extinction. Instead, he sees it taking on a new, more specialised role.
“At our bank, 87 percent of transactions happen in the digital mode. But branches won’t disappear; their structure and purpose will change,” he notes. “Earlier, we had 2,500 sq ft branches with 15–16 employees. Now, 4–5 people are enough.”
He believes branches will increasingly focus on compliance-related activities, particularly KYC, which still require a local presence. “Gen Z customers prefer digital banking, but for KYC and compliance, you need a branch to connect with the community. Everything will coexist, just in different proportions,” Varughese adds.
Reskilling the workforce for a digital era
The rise of automation often raises fears about job displacement, but Varughese views it as an opportunity for evolution. “Maybe 10 or 15 years ago, staff could survive without knowing technology. Today, that’s impossible,” he asserts.
Every employee, he insists, must learn, unlearn, and relearn continuously. “They will have to upskill and reskill, there’s no other option,” he says firmly. The challenge, however, lies in managing a multi-generational workforce. “This is a generation where four different generations, the baby boomers, Gen X, millennials, and Gen Z, work together. Change management becomes tough in such a setup, especially in traditional organisations like ours.”
Change management: Lessons from UPI and beyond
Few technological disruptions have altered India’s banking landscape as profoundly as UPI. For Varughese, it’s the perfect case study in how fast customer behaviour can evolve.
“UPI changed the way people think about banking,” he says. “Most tech leaders like me are now focused on scaling server capacities to handle the massive UPI transaction loads.”
Having witnessed multiple inflection points, from manual banking to the first digital systems and now AI, Varughese understands that transformation is rarely smooth. “When we moved from manual to TBA systems, it was a complete shift. Now it’s one technology to another technology. Change management is always difficult, but you have to go through it,” he reflects.
Cloud migration: A double-edged sword
While many organisations have embraced the cloud with open arms, Varughese offers a more cautious perspective, particularly for regulated sectors like banking.
“Cloud migration has benefited non-regulated entities. But for regulated ones, especially banks, core banking systems are best kept on-premise or in co-located data centres,” he explains.
The reasoning is straightforward, control, compliance, and cost. “Many organisations have moved back from cloud to on-prem because of high recurring costs. Cloud has its advantages, but it’s not suitable for everything. SaaS works for some applications, but not all. For core banking, I would say no,” he says.
Skill shortages further complicate the picture. “If you don’t have the right skill set, you can’t manage AI, cloud, or any modern tech effectively,” he cautions.
Collaborating with fintechs and the need for transparency
On partnerships, Varughese reveals that Dhanlaxmi Bank has collaborated with NST for microfinance initiatives, a move that broadens the bank’s reach among underserved segments.
When asked about the growing automation in loan approvals, where credit decisions are made in seconds, Varughese emphasises that digitisation actually enhances transparency.
“In the digital world, everything leaves a trace,” he says. “If a loan gets rejected, we can easily find out why, whether it’s credit score, documentation, or anything else. That traceability is what makes digital systems accountable.”
As our conversation drew to a close, one theme that stood out was adaptability. For Varughese, the future of banking isn’t just about adopting new technologies; it’s about evolving with them.
“When we moved from paper to technology, it was a complete transformation. Now we’re moving from one kind of technology to another. There will always be challenges, but we’ll have to sort them out and move on,” he says, summing up his philosophy with pragmatic optimism.