The rapid advancement of Artificial Intelligence (AI) has profoundly reshaped the global banking landscape, and India is no exception. In recent years, Indian banks, both public and privatehave begun to embrace AI technologies to improve operational efficiency, enhance customer experience, and manage risks more effectively. From intelligent chatbots and credit scoring models to fraud detection systems and automated investment advisory services, AI is revolutionizing how financial institutions interact with their clients and make data-driven decisions. This research paper aims to examine the growing role of AI in the Indian banking sector, evaluating its key applications, strategic benefits, and associated challenges. It explores how AI is enabling digital transformation across various functions such as customer service, credit underwriting, and cybersecurity. The study also discusses ethical concerns, data privacy issues, and the digital divide that still limits AI’s reach in rural India. Based on secondary data from industry reports, academic literature, and policy documents, this paper provides a comprehensive analysis of AI adoption trends in Indian banking, concluding with strategic recommendations for sustainable and inclusive AI integration.