The integration of Artificial Intelligence (AI) into the banking sector is transforming financial intermediation, risk management and customer engagement. In India, this transformation is occurring alongside rapid digitalization and the expansion of financial inclusion initiatives. This paper critically examines the role of AI in enhancing operational efficiency, strengthening risk management frameworks and promoting inclusive finance within the Indian banking system. It further evaluates emerging risks, including algorithmic bias, model opacity, cybersecurity vulnerabilities and systemic concentration risks. The study analyses regulatory responses led by the Reserve Bank of India, particularly the Framework for Responsible and Ethical Enablement of AI (FREE-AI) and situates them within global regulatory discourse. The paper concludes with policy recommendations aimed at ensuring that AI adoption remains ethical, transparent and aligned with financial stability objectives.
Meena, M. (2026). AI-Driven Transformation of India’s Banking Sector: Opportunities, Risks and Regulatory Imperatives. International Journal of Global Research Innovations & Technology, 04(01), 22–30. https://doi.org/10.62823/IJGRIT/04.02.8815
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