IMPACT OF ARTIFICIAL INTELLIGENCE ON THE PRODUCTIVITY OF FINANCIAL INSTITUTIONS IN INDIA

Artificial Intelligence (AI) has rapidly emerged as a transformative force in the global financial sector, drivingefficiency, accuracy, and innovation in service delivery. In India, the integration of AI technologies by banks,Non-Banking Financial Companies (NBFCs), and fintech firms is reshaping operational models by reducingcosts, enhancing fraud detection, and accelerating loan processing. This study investigates the impact of AI onproductivity within Indian financial institutions by analyzing secondary data from RBI, NASSCOM, andindustry reports. A comparative evaluation of AI-driven and traditional banking practices is conducted acrossthree dimensions: cost efficiency, operational accuracy, and service speed. The findings reveal that AI not onlylowers administrative expenses but also enhances compliance mechanisms and shortens service turnaroundtimes. Despite these significant benefits, the research identifies critical challenges such as regulatory ambiguity,data governance concerns, and workforce skill” gaps that hinder full-scale adoption. The study concludes thatAI adoption has the potential to significantly boost productivity in the Indian financial sector, provided thatinstitutions adopt hybrid approaches combining AI capabilities with human “expertise and that regulatorsestablish clear frameworks to guide responsible implementation.