India’s banking sector is currently in its critical stage of transformation and is reconsidering its strategy to become more sustainable through artificial intelligence, embedded finance, and cloud-native architecture, among others.
In an interview on Express Computer, Anuj Agarwal, Senior Director, Financial Services, Capgemini, provides insights on the changes happening within the Indian banking industry and their implications for the banking landscape in India in 2026.
Banking in 2026: Traditional to intelligent architecture
The transformation happening in the Indian banking sector is no longer evolutionary but revolutionary. There has been a paradigm shift from capital-intensive business models to technological-enabled architectures.
“Indian banks in 2026 are undergoing transformative shifts from traditional, capital-intensive banking models towards technology-first banking architecture,” says Agarwal.
The central aspect of this paradigm shift is the use of artificial intelligence (AI) and agentic AI. This technology is being used beyond pilots and experiments. “The biggest shift will be the wide adoption of AI and agentic AI, evolving from pilot-level use cases to large-scale deployment in production, making possible autonomous workflows in underwriting, AML, and customer service.”
There have also been fundamental transformations in how lenders gain access to GST, invoice, and transaction data through public rails, enabling instant, data-driven underwriting, especially for MSMEs.
Hyper-personalisation: Data to decisions
AI is enabling banks to move beyond generic offerings towards highly personalised financial experiences. “In 2026, banks are moving beyond static segmentation and leveraging AI to offer individualised financial products,” points out Agarwal.
These offerings are dynamic and context-aware. They are generated based on contextual, behavioural, and transactional data.
Virtual assistants are also evolving significantly. AI-powered virtual assistants are becoming central to customer engagement, evolving into interactive financial coaches. These assistants are capable of proactive engagement. “They can predict cash flow issues, recommend investment opportunities, analyse spending patterns, and provide real-time alerts,” adds Agarwal.
Predictive analytics is further strengthening decision-making. AI models now incorporate behavioural signals, transaction histories, and income projections to provide more inclusive, precise credit assessments. This is helping banks expand access while managing risk more effectively.
Cloud-native banking: Building for scale and resilience
To support these capabilities, banks are modernising their core infrastructure. “Indian banks are aggressively modernising their technology foundations by shifting from legacy, monolithic systems to cloud-native, API-first, microservices-based architectures,” affirms Agarwal.
This shift is essential to handle scale and complexity. It supports real-time processing, interoperability, and AI-driven operations.
Emerging technologies such as 5G and edge computing are expected to further accelerate this transformation. “With 5G enabling ultra-low latency and high-throughput connectivity, banks can deliver real-time services even in remote regions.” This is particularly relevant for India’s diverse and distributed population. Further, 5G and IoT will play a key role in enabling real-time, hyper-automated banking.
Reinventing the branch: Transactions to advisory
As digital channels take over routine transactions, the role of physical branches is being redefined. Physical branches have been evolving from transaction-centred service points to experience-led advisory hubs.
Banks are now focusing on hybrid, or ‘phygital’, models.
“They are blending human expertise with digital tools to deliver services that are most convenient for each customer,” says Agarwal. Technology is simplifying in-branch experiences as well. “Modern branches now feature self-service kiosks, digital screens, and virtual meeting rooms,” he adds.
Onboarding and KYC processes have also become significantly faster. Onboarding and KYC have become significantly faster through digital KYC, facial recognition, AI-driven verification, and paperless workflows. This is reducing friction and improving customer experience.
Driving financial inclusion through digital infrastructure
Financial inclusion remains a key priority, and digital banking is playing a central role in expanding access. “Digital banking is reshaping financial inclusion in India by expanding access to credit, payments, and essential financial services across rural and semi-urban segments,” avers Agarwal.
He adds that India’s digital public infrastructure is a critical enabler. “Platforms such as UPI, Aadhaar Enabled Payment System, and Aadhaar-enabled services allow individuals to transact using biometric authentication and mobile devices.”
These systems are improving transparency and reducing dependency on informal channels. They have democratised payments, improved transparency through direct benefit transfers, and reduced reliance on informal credit. With increasing smartphone penetration and digital literacy, the impact is expected to deepen.
Agarwal believes that financial inclusion in India is expected to further improve in the coming months and years.
The way forward for banks
The Indian banking sector is experiencing a revolution that sees the fusion of intelligence, connectivity, and customer focus reshape the entire industry.
With embedded finance, artificial intelligence, cloud-first architecture, and digital inclusion taking centre stage, the transformation is no longer about adopting technology but about re-engineering the business from within.