ARTIFICIAL INTELLIGENCE – DRIVEN INNOVATION IN SUSTAINABLE BANKING: A COMPARATIVE STUDY OF STATE, PUBLIC SECTOR AND PRIVATE SECTOR BANKS IN INDIA

Abstract

Artificial Intelligence (AI) has become a strategic enabler of innovation in the banking industry by enhancing operational efficiency, strengthening risk management, improving customer experience, and advancing sustainable banking practices. Technologies such as machine learning, natural language processing, robotic process automation, and predictive analytics have accelerated digital transformation while supporting environmental, social, and governance (ESG) objectives within financial institutions (Reserve Bank of India [RBI], 2024; World Economic Forum [WEF], 2024). Although Indian banks have increasingly adopted AI-enabled solutions, the level of implementation and its contribution to sustainable banking vary considerably across state-owned, public sector, and private sector banks due to differences in technological infrastructure, organizational capabilities, investment priorities, and strategic orientation. Existing literature has largely examined AI adoption or sustainable banking independently, with limited comparative evidence integrating both dimensions across different categories of Indian banks (OECD, 2024; BIS, 2024). This study comparatively examines the influence of AI-driven innovation on sustainable banking in State Bank of India, Punjab National Bank, and HDFC Bank. A quantitative research design is employed using structured questionnaires administered to employees and customers of the selected banks. The collected data are analysed using descriptive statistics, reliability analysis, exploratory factor analysis, correlation, multiple regression, analysis of variance (ANOVA), and structural equation modelling (SEM) through SPSS and AMOS/SmartPLS. The study is expected to reveal that AI-driven innovation significantly enhances operational efficiency, customer satisfaction, fraud detection, resource optimisation, financial inclusion, and environmental sustainability, while private sector banks demonstrate relatively higher AI maturity than state-owned and public sector banks. The findings provide a comprehensive comparative framework for understanding AI-enabled sustainable banking and offer practical implications for policymakers, regulators, and banking executives in developing responsible AI strategies that promote long-term resilience, green finance, and sustainable financial development in India (UNEP FI, 2023; RBI, 2024).