The 95-year-old actor was admitted to Lilavati hospital in suburban Bandra on Wednesday.
"He is doing better now. The medical reports are saying a small patch of pneumonia is there," Saira Banu said.
Dilip Kumar diagnosed with pneumonia
Dilip Kumar is recuperating, says his nephew
"God willing, he (Dilip Kumar) will be out of it soon. But he's doing fine," Saira Banu said.
Dilip Kumar's nephew Faisal Farooqui first shared the news about his ill health on his official Twitter account.
"Saab has been admitted to Mumbai's Lilavati Hospital as he was bit uneasy due to a chest infection. He's recuperating. Requesting your duas and prayers," he tweeted.
Dilip Kumar is one of the legendary actors of Bollywood
Known as the "Tragedy King of Bollywood", Dilip Kumar has given memorable performances in films such as 'Andaz', 'Aan', 'Madhumati', 'Devdas', and 'Mughal-e-Azam'.