How Cloud Technology will Transform the Banking Industry The Indian cloud services market, valued at USD 8.3 billion in 2023 and projected to grow to USD 24.2 billion by 2028, is currently dominated by international providers. With this initiative, the RBI seeks to boost domestic players and enhance India's digital sovereignty.

Reserve Bank of India (RBI) announced its ambitious plan to launch a locally-developed cloud platform tailored to the needs of financial institutions. The initiative has sparked widespread industry interest and debate on its potential to reshape the financial sector. The pilot program, scheduled to commence in 2025, aims to offer affordable and localized cloud storage solutions, providing smaller financial institutions with a cost-effective alternative to global players like Amazon Web Services, Microsoft Azure, and Google Cloud, as reported by Reuters on Monday.

"The RBI's effort is a visionary step toward modernizing India's financial data infrastructure at large," said George K John, executive director, ESAF Small Finance Bank. He added, "The pilot program has the potential to set a benchmark for how central banks globally approach cloud data storage in an era of rapid digitalization."

Inclusion and digital sovereignty

The Indian cloud services market, valued at USD 8.3 billion in 2023 and projected to grow to USD 24.2 billion by 2028, is currently dominated by international providers. With this initiative, the RBI seeks to boost domestic players and enhance India's digital sovereignty.

This localized cloud service, designed to meet the unique needs of smaller financial institutions like cooperative banks and fintech firms, will focus on affordability, data security, and scalability. "The positives of the RBI's initiative include enhanced data sovereignty and regulatory compliance, reduced costs for smaller financial institutions, and the fostering of digital transformation through AI and machine learning," noted John.

The project is being driven by the Indian Financial Technology and Allied Services (IFTAS), RBI's research wing, in collaboration with private sector IT firms. Consultancy firm, EY, has been appointed as an advisor to the project, and the initial funding will come from the RBI's asset development fund, which has a corpus of INR 229.74 billion (USD 2.72 billion).

Dennis Gada, executive vice president at Infosys emphasized the transformative potential of cloud technology for banks. "Modern cloud will enable banks to deliver better customer experiences and bring innovation into their strategy. Turning to Cloud to modernize legacy systems is a critical step for banks," he said in a statement.

While enthusiasm is high, industry experts stress the need for careful execution. "It is essential to focus on building a robust infrastructure to ensure scalability and privacy. Establishing a framework that balances centralized control with the dynamism of private-sector innovation will be key," John highlighted.

Data localization

This project also aligns with the RBI's broader push for data localization, a move aimed at ensuring that critical financial data remains within India's borders. A procurement document from IFTAS outlines that only Indian-incorporated companies with proven cloud expertise can bid for the project. They will be required to establish data centers in Mumbai and Hyderabad, with strong interest already reported from private players.

"We have a humongous amount of interest from private players who want to partner. A significant number of IT companies as well as Indian cloud services companies have expressed their interest," a senior source close to the project told Reuters.

Digital transformation of banks

The banking and financial sector is optimistic about the RBI's leadership in this area. "Cloud drives innovation as financial services firms leverage Gen AI and automation to personalize customer experiences and stay ahead of competitors," Ravinder Khokhar, global head of cloud at Capgemini, said in a statement. "Financial organizations that adopt a data-driven, cloud-focused, and customer-centric approach can accelerate business, reduce costs, and enhance scalability."

John echoed this sentiment, asserting that the initiative could serve as a global benchmark. "The digital initiatives introduced by RBI in the Indian banking sector have been successful. Based on this experience, we are confident that this cloud platform will serve as a global standard for safe and effective cloud data storage," he said.

As the pilot program unfolds, its phased expansion will be closely watched by global financial regulators and industry leaders. While the estimated final cost of the project remains unclear, its success could herald a new era of cloud infrastructure led by central banks.

"RBI's indigenous cloud infrastructure is a promising initiative," said John. "This is a trend-setter that could define how financial systems adopt modern technology while ensuring data security and sovereignty."

With India's burgeoning cloud market and the potential for widespread adoption of artificial intelligence and machine learning technologies, the RBI's initiative is poised to position the country as a tech powerhouse while driving financial inclusion and innovation.