Global funds turn wary of Indian stocks as AI boom draws money elsewhere

India's banking sector may leverage its legacy technology challenges as an advantage in the transition to artificial intelligence, according to Boston Consulting Group (BCG). Neetu Chitkara, APAC Head of Fintech and MD & Partner at BCG, explained that banks with fewer legacy systems could leapfrog directly into AI-first operations.

The report, Balance: Thriving in the Age of AI, launched during the Global Fintech Fest (GFF) 2026, explores how financial institutions can balance growth and innovation with safety and ethos as they adopt AI. India has a history of skipping technology cycles, having moved directly from mobile and digital public infrastructure to AI.

This leapfrogging could be particularly beneficial for cooperative and rural banks, which have simpler legacy systems. AI could help Indian banks achieve gains such as nearly 100 basis points of return on assets, almost twice the assets per employee, and a 25-30% reduction in cost-to-income ratio. However, capturing these gains will require a shift from simply adding AI tools to existing systems to fundamentally redesigning processes around AI.

This approach could be a significant advantage for India, allowing institutions to build the next generation of banking directly around AI without being constrained by decades of complex legacy infrastructure.