ARTIFICIAL INTELLIGENCE FOR GREEN BANKING AND SUSTAINABLE FINANCIAL DEVELOPMENT: A STUDY OF STATE PUBLIC SECTOR AND PRIVATE SECTOR BANKS IN INDIA

Abstract

Artificial Intelligence (AI) is transforming the global banking industry by improving operational efficiency, enhancing customer experiences, strengthening risk management, and promoting sustainable financial practices. In India, the increasing emphasis on green banking and sustainable financial development has encouraged both public and private sector banks to integrate AI-driven technologies into their strategic and operational activities. Despite this growing adoption, limited empirical research has comparatively examined how AI influences green banking initiatives and sustainable financial development across State Public Sector Banks and Private Sector Banks in India. This research gap highlights the need for a comprehensive comparative investigation. The primary objective of this study is to examine the impact of Artificial Intelligence adoption on green banking practices and sustainable financial development while comparing its effectiveness between selected public and private sector banks in India. The study adopts a quantitative research design using a structured questionnaire administered to 400 employees, managers, and sustainability officers from five major public sector banks and five leading private sector banks. A stratified random sampling technique is employed to ensure adequate representation of both banking sectors. The collected data are analysed using IBM SPSS, SmartPLS, AMOS, and R statistical software. Statistical techniques include descriptive statistics, reliability and validity analysis, correlation, multiple regression, independent sample t-test, ANOVA, Structural Equation Modeling (SEM), and mediation analysis to test the proposed research model and hypotheses. The findings indicate that Artificial Intelligence adoption has a significant positive influence on green banking initiatives and sustainable financial development. Private sector banks demonstrate higher AI adoption levels and stronger sustainability performance than public sector banks. The study also finds that employee AI readiness positively supports successful AI implementation. The research provides practical implications for bank managers, policymakers, and regulators by highlighting strategies to accelerate AI-enabled green banking and strengthen sustainable financial development.