Financial IT

Indian banks see double-digit increase in IT spending

Karl Flinders

The banking and security sectors in India will jointly spend 477bn Indian rupees (INR) on IT in 2014 as the increasing number of branches leads to rising IT staff costs, according to Gartner.

This is an increase on the 417bn INR spent on IT in 2013 and 369bn INR in 2012.

Part of the increase is the result of expansion into areas of the country without banks. “Banks will continue to focus on expanding their branch network. There will be about 2,000 new branches in India by the end of this year,” said Vittorio D’Orazio, research director at Gartner. 

“Internal services (that includes IT personnel) is projected to be the fastest growing segment at 21.6% in 2014, largely due to the expansion strategies of banks across the country, especially in rural areas, which require more personnel in the field,” said Gartner.

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There is pressure on Indian banks to become more competitive and win more customers. The Reserve Bank of India, which regulates the Indian financial sector, last year announced guidelines for new companies to enter the banking sector, which is leading to greater competition. 

This, alongside the increasing penetration of broadband and the growth in smartphone use in India, is driving the development of IT-based services for consumers at banks.

“The modernization of the back office, the need to be compliant with international regulations, and increased challenges from new more demanding customers are other trends we see in these markets,” said D’Orazio.

Banks and securities firms will spend the most on IT services (149bn INR) in 2014, some 15.3% higher than in 2013.

Software spending, which is predicted to increase by 19.2% in 2014, will be driven by the replacement of core banking systems and other back-office consolidation as organizations move from internally developed software to external packages.