Authors: Dr. Sadaf Khan Associate Professor, Kajal Yadav Assistant Professor, Bhumi Hedau, Muskan Batham
Abstract: Artificial Intelligence (AI) has emerged as one of the most transformative forces reshaping the global banking and financial services industry, and India has become one of its most dynamic testing grounds. This paper analytically examines the adoption of AI in the Indian banking sector, its impact on operational efficiency, customer service, fraud management and financial inclusion, and the principal challenges accompanying its diffusion. The study adopts a descriptive and analytical research design based entirely on secondary data drawn from the Reserve Bank of India (RBI) publications, including the FREE-AI Committee Report (2025), RBI Annual Reports (2022- 23 to 2025-26), the RBI Payment Systems Report, National Payments Corporation of India (NPCI) statistics, industry reports and peer-reviewed academic literature. Trend analysis, percentage analysis and comparative tabulation are used to interpret the data. The findings indicate that AI adoption in Indian banking has grown rapidly but unevenly: larger and better-capitalised banks, particularly private sector banks, lead adoption, while customer support, credit underwriting, sales and cybersecurity constitute the dominant use cases. The analysis further shows a steep decline in the number of card, internet and digital payment fraud cases between 2023-24 and 2025-26, coinciding with the expansion of AI-enabled transaction monitoring, even as the value of advances-related frauds remains a concern. The paper concludes that AI can make Indian banking more inclusive, efficient and secure, provided banks invest in data governance, explainability, talent and ethical safeguards consistent with the RBI's FREE-AI framework, and offers recommendations for banks, regulators and researchers.
