This paper explores regulatory preparedness of the banking and fintech industry of India to protect consumer protection in the face of the high-rate adoption of Artificial Intelligence (AI). AI is transforming the way operations are conducted, interaction with customers, and financial innovations, which make it possible to provide financial inclusion to demographics. Nevertheless, the rapid expansion of the application of AI has also brought complicated regulatory and ethical issues, and those which are related to data privacy, transparency in algorithms, eliminating bias, and fraud control. The study focuses on the mixed-methodology approach based on qualitative interviews with the regulators, industry professionals and consumers and quantitative research or survey of 700 professionals and users of the banking and fintech industries. The paper examines the piecemeal regulatory environment that has the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), and the Ministry of Electronics, and Information Technology (MeitY). The results show deficiencies in the law enforcement systems and laws although positive progress with the Digital Personal Data Protection Act, 2023 and the FREE AI framework of RBI. Findings indicate that regulatory preparedness is a key to improving the AI adoption and the effectiveness of consumer protection, while the lack of transparency and divided supervision diminishes consumer trust. The relationships are mediated by institutional pressures and ethical AI principles, which underline the necessity of harmonised active regulation and inclusive governance. The policy suggestions are to put in place common regulatory frameworks, dynamic data governance, algorithms audits and grievance redressal to have a safe, inclusive, and confident AI-based fintech ecosystem in India. The research is needed to add to academic literature and policy-making because, by mapping the AI regulatory preparedness of India and providing strategic directions where consumer protection may be improved within the digital financial environment, the study will undertake its role in the academic community and policymaking.