The Reserve Bank of India’s (RBI) FREE-AI framework for responsible adoption of artificial intelligence has brought into focus the limited penetration of AI among Urban Cooperative Banks (UCBs), even as India pushes for technology-led inclusive growth. While India’s digital public infrastructure provides a strong foundation for AI integration in financial services, adoption across the sector remains uneven. Adoption is largely concentrated among larger banks, while many UCBs face significant constraints, including inadequate data infrastructure, shortage of skilled personnel and limited IT budgets. The RBI’s FREE-AI framework seeks to address these gaps by promoting innovation alongside strong risk management. Aligned with the India AI Mission and the Digital Personal Data Protection Act, the framework aims to create a safe, scalable pathway for UCBs to gradually adopt responsible AI and enhance service delivery.