Banking the Unbanked : Sustainable AI as a Tool for MSME Financial Inclusion Pooja Allure ¹, Prof. Shivkumar Deene ², ¹Research Scholar, Dept. of Commerce, Central University of Karnataka ² Professor, Dept. of Commerce, Central University of Karnataka Email: poojaallure2002@gamil.com , shivakumardeene@cuk.ac.in ABSTRACT Despite employing over 110 million people and contributing approximately 30% to India’s GDP, Micro, Small and Medium Enterprises (MSMEs) face a formal credit gap estimated at USD 300 billion, with only 14% having access to formal bank credit (IFC, 2017; RBI, 2023; Ministry of MSME, 2023). This paper examines how Sustainable Artificial Intelligence (AI) can bridge this gap within the Indian banking ecosystem. Through thematic synthesis of secondary data from institutional reports, policy documents, and peer-reviewed literature, the study maps AI tools to MSME credit needs, evaluates their Environmental, Social, and Governance (ESG) sustainability dimensions, and analyzes case studies from Lendingkart, SBI YONO, and M-Pesa Fuliza. Key findings include a strong positive correlation (r = +0.97) between AI adoption maturity and MSME credit access, a 4.8 percentage-point NPA advantage of AI-driven lending over traditional models, and a composite sustainability score of 5.4/10 against a target of 8.1/10. The paper proposes an integrated ESG-based framework and a four-stage implementation roadmap for responsible, inclusive, and green AI-driven MSME banking. Keywords: MSME, Financial Inclusion, Sustainable AI, ESG