We've been here before, kind of - when computerisation threatened to drive out humans from jobs in banks in the 80s. Today, India's biggest private sector banks continue to reduce headcount as AI implementation gathers pace.

Yet, public sector bank-hiring during the year more than offset the job disruption among their private sector rivals. India's banking industry employs over 1.5 mn people, and is still a positive net recruiter. Branch networks are not yet fully developed. Needs of development banking will shield employment from AI, which is being implemented under strict RBI vigilance.

AI processes are, thus, making a modulated entry into banking, leading to gradual attrition.

Globally, AI has made inroads into banking operations at the front and back ends, automating lower-value functions. Impact on operational efficiency is more profound in core banking functions like credit scoring, fraud prevention and cybersecurity.

Banks must maintain transparency over AI-assisted lending and compliance decisions to satisfy regulators. AI roles in core banking need continuous human oversight, which makes banking job disruptions uneven. Yet, AI can outdo human bankers in key areas. For instance, AI can identify correlations between variables invisible to human analysts. This vastly improves risk assessment, and banks will push such AI implementation.

Indian banks are in a structural upcycle with strong credit growth to households. The country has modest levels of household debt, and RBI is conservative in steering credit away from unsecured borrowings towards asset-creating mortgages.

India has among the fastest bank credit growth rates among major economies. This should moderate AI-related job displacement in the sector. But competitive intensity will require banks to operate at the technology frontier, as they cater to low-credit penetration amid accelerating digital financial infrastructure. AI can push financial inclusion in ways that were not possible even a decade ago. India's banking landscape will have to adapt to a new normal.