The Indian banking sector has undergone significant transformation over the past three decades, driven largely by economic liberalization, regulatory reforms, and the inflow of Foreign Direct Investment (FDI). In recent years, Artificial Intelligence (AI) has emerged as a critical technological force reshaping banking operations, service delivery, and risk management. This paper examines the combined impact of FDI and AI on the socio-economic development of India through the banking sector. It analyzes how foreign capital facilitates AI adoption, enhances efficiency, promotes financial inclusion, influences employment patterns, and contributes to economic stability. The study is based on secondary data drawn from reports of the Reserve Bank of India (RBI), World Investment Reports, annual reports of select banks, and existing literature. The findings suggest that AI-enabled FDI has played a significant role in improving banking performance and expanding socio-economic benefits, though challenges related to employment displacement, data privacy, and regulatory readiness persist.