The Indian banking sector is undergoing a transformative shift with the integration of Artificial Intelligence (AI) technologies. From streamlining back-end operations to enhancing customer experience, AI is redefining how banks interact, process data, manage risk, and offer services. This paper examines the impact of AI on the Indian banking industry, focusing on the adoption patterns, practical applications, opportunities, and challenges. Utilizing secondary data from government reports, industry whitepapers, academic research, and real-world case studies, the paper evaluates the strategic importance of AI in shaping a more agile, efficient, and customer-centric banking ecosystem. The research also explores ethical concerns, regulatory preparedness, and the divide between public and private sector banks in AI adoption. Key findings highlight AI’s ability to improve operational efficiency, reduce fraud, enhance compliance, and provide personalized banking experiences. However, the adoption journey is also fraught with issues related to data security, algorithmic transparency, job displacement, and digital inequality. The study concludes by recommending policy interventions and strategic frameworks for responsible, inclusive, and scalable AI integration in Indian banking.