Banking · Alternative Credit Scoring & Financial Technology
Which of the following best describes the primary limitation and regulatory concern regarding 'Alternative Credit Scoring' models that utilize non-traditional data (e.g., utility bills, digital footprints)?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Social media scoring has officially replaced traditional CIBIL scores across all Indian banks.
- 2These models are restricted exclusively to loans under ₹5,000 with a tenure of less than 12 months.
- 3The primary concerns are the explainability of algorithm models and the potential risk of algorithmic bias.✓
- 4Alternative scoring is completely prohibited under the Banking Regulation Act due to KYC non-compliance.
Correct answer
The primary concerns are the explainability of algorithm models and the potential risk of algorithmic bias.
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