India’s banking sector could turn one of its biggest technology handicaps — legacy infrastructure — into an advantage in the shift to artificial intelligence, with banks that have fewer legacy systems potentially able to leapfrog directly into AI-first operations, according to Boston Consulting Group (BCG).“One of the things we have seen some institutions do is use their handicap as a strength,” Neetu Chitkara, APAC Head, Fintech and MD & Partner at BCG, told ET AI.Chitkara’s comments come as BCG has released its flagship Global Fintech Fest (GFF) 2026 report, Balance: Thriving in the Age of AI. The report, launched by the Union Finance Minister during the valedictory address at GFF 2026, examines how financial institutions can balance growth and innovation with safety and ethos as they adopt AI, while reimagining operating models, strengthening governance and preparing the workforce for an AI-enabled future.Also Read: If attackers are using AI, companies will have to use AI to defend themselves: Razorpay CEOChitkara said India has already demonstrated its ability to leapfrog technology cycles in financial services. While several developed markets moved from internet banking to mobile banking, India was able to skip parts of that journey and build a financial ecosystem around mobile and digital public infrastructure.AI could create a similar opportunity, particularly for parts of the banking sector that do not have decades of complex technology infrastructure to unwind.“Cooperative banks, for example, don't have a very complex legacy system. They can leapfrog,” Chitkara said.The argument comes as India’s financial institutions enter what BCG describes as an AI inflection point. Indian banks already outperform global peers on key profitability metrics, with return on equity at 14.9% compared with the global average of 10.3%. Yet productivity growth in the sector has remained around 1% annually for the past 15 years.AI, BCG believes, could help close that gap.The consulting firm estimates that an agentic bank of the future could unlock nearly 100 basis points of return on assets uplift, while delivering almost twice the assets per employee and a 25-30% cost-to-income ratio. AI could also reduce banks’ cost to serve by 30-40%.But capturing those gains will require more than simply adding AI tools to existing systems.For large banks, the challenge is often the opposite: years of technology investments have created multiple layers of legacy infrastructure, making it harder to redesign processes end-to-end around AI.Chitkara said institutions with fewer legacy constraints can instead build new parts of their technology and operating models around AI from the outset. This could be particularly relevant for cooperative and rural banking, where shared technology infrastructure can help smaller institutions avoid having to independently build complex systems.The approach is also consistent with the broader shift BCG sees in how banks should use AI — moving beyond deploying individual tools to reshaping entire functions and eventually creating new businesses around AI.“Address the flow even as we address the stock,” Chitkara said, referring to the need to continue dealing with existing infrastructure while building new capabilities.That distinction could become increasingly important as Indian banks move from experimenting with AI to trying to generate measurable returns from it. More than 80% of leaders surveyed by BCG identify AI and generative AI as a top technology priority, while two in three plan to increase AI spending by 15% or more in the coming years.Also Read: Your bank account could one day become an AI agent: Perfios Group CEO Nitin ChughThe report also points to the potential for AI to expand financial inclusion, with the technology capable of bringing more than 400 million underserved customers into formal financial services by improving cost-to-serve and enabling better underwriting of thin-file customers.For India, that could mean an unusual advantage: institutions do not necessarily have to follow the technology path taken by developed markets. In some parts of the financial system, having less legacy to carry forward could allow them to build the next generation of banking directly around AI.