Bridging Legacy Systems And Digital Platforms: A Comprehensive Investigation Of Application And Infrastructure Modernization Challenges In Core Banking Systems

The modernization of legacy core banking systems has become a strategic imperative for financial institutions in India, driven by rapid advancements in digital payments, regulatory mandates, and growing customer expectations. This paper explores the multifaceted challenges associated with transitioning from legacy architectures to next-generation digital platforms, particularly in the context of Indian banking. It presents a structured analysis of technical, operational, and organizational barriers such as data model incompatibility, downtime risk, skill shortages, and regulatory compliance. Drawing on recent case examples—including public sector migration efforts and cloud adoption strategies—the study highlights the tension between maintaining operational continuity and embracing innovation. It also contextualizes these transformations within India’s evolving regulatory environment, including recent RBI directives on IT governance and data localisation. The proposed framework emphasizes scalable, cloud-agnostic architectures that are resilient, secure, and interoperable with national digital infrastructure like UPI and Aadhaar. By aligning modernization efforts with regulatory compliance and digital innovation, this study aims to support Indian banks in building future-ready systems. The findings offer practical insights for policymakers, CIOs, and enterprise architects navigating the legacy-to-digital transition in India’s unique financial ecosystem.