In the economy of a developing country like India, where the population has reached to 1200 million and out of this nearly 500 million deal with banking every day. In such a situation there was an urgent need to ensure financial inclusion and greater transparency in the banking sector and this need was fulfilled by adopting technological innovation in the working system of banks. In order to bring this innovation, the Indian banking sector is going through a vital change from all its verticals and this transformation not only leads to drastic change in banks approach towards its customers but also leads to vigorous information and technological change of banking products too. Banks in the contemporary era face a blitz of challenges, spurred by the latest technological advancements and mounting customer expectations, which is stressing the need for IT modernization and digital innovation. The beginning of the21st century has significantly marked a growth in the banking system. Innovation in the banking sector got a boost with the generation of private and foreign banks which led to activation of technological sophistication in every banking transaction. It also brought a fundamental shift in the functioning of banks both internally and externally, as it enables banks to provide better customer service The key advantages of adopting technology and innovation resolutions in the field of banking are faster, accurate and efficient. This paper projects on innovation in the banking sector which also leads tore-engineering of business processes and tackling various issues to create a customer centric operating model.