Banking · Banking Regulations and Compliance

City-Central Bank is redesigning its Product Development Process to compete with Fintech players. 1. The new policy mandates that Idea Generation must include mandatory monthly meetings with at least three Venture Capitalists to identify emerging market trends. 2. Screening will now be done by an AI-Algorithm that checks the 'Regulatory Compatibility' by scanning all RBI Master Directions from the last 10 years. 3. Concept Testing must be performed using Virtual Reality (VR) where customers interact with a 'Virtual Branch' to experience the new product. 4. Business Analysis must include a 'Competitor Price Matching' simulation where the product's profitability is tested against the lowest rates offered by the top 5 competitors. 5. Product Development will follow a 'DevSecOps' model, ensuring that security patches are integrated every 24 hours during the build. 6. Test Marketing will be replaced by a 'Shadow Launch' where the product is available to 1% of the app users selected at random, without any formal announcement. 7. Commercialization will be 'Hyper-Personalized,' using Big Data to offer different interest rates to different customers based on their Social Media Score and spending habits. 8. The bank's Legal Counsel raises a concern that using Social Media Scores for pricing (Statement 7) might violate Fair Lending Practices and the DPDP Act, 2023. 9. The Chief Risk Officer expresses concern that the AI-Algorithm in Screening (Statement 2) might have 'Algorithmic Bias' and miss nuanced regulatory warnings. 10. The IT Head is worried that the VR Concept Testing (Statement 3) is too expensive and might not provide useful data for simple products like a 'Fixed Deposit.' 11. The Marketing Head argues that the 'Shadow Launch' (Statement 6) prevents the bank from building 'Hype' and might lead to a slow start. 12. Despite these concerns, the CEO approves the plan to be implemented. Which of the following statements in the bank's new process is most likely to face a direct regulatory ban or severe legal challenge regarding fair lending practices and data protection in India?