Prep the peppers: Slice banana peppers into 1/4-inch rings. Remove seeds and membranes for a milder bite.
Pat dry with paper towels to help the coating stick.
Preheat your air fryer: Set to 390°F (200°C) for 3–5 minutes. A hot basket helps the coating crisp right away.
Set up the dredging station: In one shallow bowl, mix flour, 1/2 teaspoon salt, garlic powder, onion powder, smoked paprika, and black pepper. In a second bowl, whisk eggs with water.
In a third bowl, combine panko with fine breadcrumbs (and Parmesan if using).
Dredge the pepper rings: Toss rings in seasoned flour, shaking off excess. Dip into egg, letting extra drip off. Coat in the crumb mixture, pressing gently so it adheres.
Arrange in the basket: Lightly spray or brush the air fryer basket with oil.
Place coated peppers in a single layer without crowding. Mist the tops with oil for better browning.
Air fry: Cook at 390°F (200°C) for 6–8 minutes, flipping halfway. They’re done when golden and crisp.
Thicker rings may need an extra 1–2 minutes.
Season and serve: Transfer to a plate and sprinkle with a pinch of salt while hot. Serve with your favorite dip and a squeeze of lemon if you like.
Repeat with remaining peppers: Work in batches to keep them from steaming. Keep finished rings on a wire rack to stay crisp.