Banking and securities companies in the country will spend Rs 41,600 crore on IT products and services in 2013, an increase of over 12 per cent compared to Rs 37,000 crore they spent last year, research firm Gartner said today.

"Indian banking and securities companies will spend Rs 416 billion on IT products and services in 2013, an increase of more than 12 per cent over 2012 revenue of Rs 370 billion," Gartner said in a statement.

The forecast includes spending by financial institutions on internal IT (including personnel), hardware, software, external IT services and telecommunications, it added.

"Most banks see expansion and increasing market share as their main priority," Gartner Research Director Vittorio D'Orazio said, adding, "As in other emerging markets, the front office gets preference over the back office in major investments."

Telecommunications remain the largest overall spending category at Rs 12,200 crore in 2013, it said.

However, software is forecast to achieve the highest growth rate amongst the top level IT spending categories – to exceed 18 per cent in 2013, Gartner said.

"A growth of 23.6 per cent is predicted for desktop software and 22.6 per cent for enterprise resource planning (ERP)/supply chain management (SCM)/customer relationship management (CRM) and other front-office applications high on the agenda," it added.

D'Orazio said modernisation and legacy replacement remain major issues for many banks as the gap widens between front-office and back-office services.

"We see increasing adoption of packages, especially for 'lite' core banking systems to address modernisation and replacement," D'Orazio added.