India’s central bank is preparing to launch a groundbreaking initiative aimed at reducing the financial sector’s reliance on global cloud providers like Amazon, Microsoft, Google, and IBM. The new project, backed by local technology firms, seeks to provide affordable cloud solutions tailored specifically for small banks and financial institutions in India. By offering a local alternative, the central bank aims to foster greater self-reliance in the country’s banking sector while also promoting the growth of the domestic cloud market.

According to reports from Reuters, the central bank's new initiative will focus on offering scalable cloud services to financial institutions that currently struggle with the high costs associated with foreign cloud services. The decision to move forward with this project follows growing concerns over the dominance of global cloud service providers in India, which have long captured the majority of the market share. As of 2023, India’s cloud market is valued at approximately USD 8.3 billion, and it is expected to grow to USD 24.2 billion by 2028, with foreign providers holding a significant stake in this growth.

The central bank’s initiative, which will roll out gradually over the coming months, is designed to cater to smaller banks and financial institutions that find it difficult to compete with the pricing models of larger foreign providers. By offering cloud services at more affordable rates, India’s central bank hopes to level the playing field, giving smaller institutions access to the technology they need without the prohibitive costs of international providers.

Shaktikanta Das, the Governor of India’s central bank, had earlier revealed plans for this initiative. The project is being spearheaded by the Financial Technology Services Division of the bank, with significant contributions from local private technology companies. Ernst & Young (EY) is reportedly serving as an advisor on the project, which is backed by an initial investment of USD 2.72 billion.

One of the key aspects of this project is that it will create a more competitive landscape for cloud services within India. Banks and financial institutions will have the opportunity to hold stakes in the cloud service provider company, giving them a financial interest in the project’s success. Additionally, the service providers involved will be required to establish data centers in Mumbai and Hyderabad, further bolstering India’s domestic tech infrastructure.

The move comes at a time when the Indian government has been pushing for greater digital sovereignty and control over critical financial data. This initiative is seen as a step toward reducing dependence on foreign technology giants and empowering local businesses to drive their own digital transformation. It also aligns with the government’s broader goals of fostering the growth of homegrown technology companies and improving the competitiveness of India’s financial sector on the global stage.

India’s central bank aims to start the implementation of this cloud service on a smaller scale initially, with broader rollouts expected in the years to come. This phased approach will allow for a more controlled introduction to the market, ensuring that the system is robust and scalable before it is made available to a wider audience.

The broader implications of this project are clear. By offering a competitive, affordable cloud alternative, India’s central bank is not only supporting the growth of smaller financial institutions but also contributing to the overall development of the country’s digital infrastructure. With local players now playing a bigger role in the cloud service market, India could see a significant shift in the balance of power between domestic and global tech providers in the coming years.

CNBCINDONESIA