The decarbonization of the Indian banking sector is critical to achieving India's climate goals and facilitating its transition to a sustainable, low-carbon economy. This study evaluates the current status of decarbonization efforts, identifies key barriers, and proposes strategic solutions to promote green banking practices. A systematic literature review (SLR) was conducted, adhering to PRISMA guidelines, to analyze existing research, policy documents, and institutional reports. The analysis categorized challenges into regulatory, financial, technological, organizational, and cultural barriers while exploring opportunities for advancement. Private sector banks have made significant strides in adopting green banking practices, including financing renewable energy projects, issuing green bonds, and integrating energy-efficient operations. In contrast, public sector banks and smaller institutions lag due to regulatory gaps, financial constraints, and technological limitations. Key challenges include the absence of mandatory sustainability regulations, limited consumer demand for green products, and high implementation costs. Promising opportunities include expanding the green bond market, leveraging advanced technologies such as AI and blockchain, and fostering multi-stakeholder collaborations. The Indian banking sector can play a transformative role in achieving the country’s climate objectives by adopting a multifaceted approach. Regulatory reforms, capacity-building initiatives, and technological integration are crucial. Strengthening the regulatory framework, offering financial incentives, and promoting consumer awareness of green banking products will drive progress. Recommendations include mandatory environmental risk disclosures, alignment with international sustainability standards, and investment in green finance instruments. Enhanced collaboration among banks, regulators, and stakeholders is essential to overcome systemic barriers and capitalize on emerging opportunities. This research underscores the need for a multifaceted approach to overcome systemic barriers and leverage emerging opportunities. By addressing these challenges, the Indian banking sector can play a transformative role in driving the country’s climate agenda while ensuring financial resilience and long-term growth. The study concludes with recommendations for policy interventions, institutional strategies, and future research directions