Artificial Intelligence has evolved the operation and functioning of every sector and banking is no exception to it. The inclusion of AI has revolutionized banking operations to a significant extent, following the introduction of Automated Teller Machines and Online Banking, transforming traditional banking practices in India. This contribution intends to unravel the complex yet pressing intersections between technology and Banking. This paper examines how AI-powered credit scoring systems, compared to conventional methods, are utilized by banks and financial institutions to accurately assess credit scores and predict credit risks. Credit scoring has been completely transformed by artificial intelligence, which offers sophisticated models and predictive analytics that promise increased efficiency and accuracy. This paper discusses the benefit of leveraging AI technology in credit scoring in terms of financial inclusion of underserved populations of the country paving the way for the establishment of an equitable society. Nevertheless, there are drawbacks and restrictions of using Algorithm technology in credit scoring. This paper highlights the main legal issues and challenges, with particular attention to issues with interpretability, data privacy, data breaches, etc. The principles of fairness, accountability, and transparency are invoked, and the possibility of unintentional biases is called into question by this lack of explainability in AI credit scoring tools. All such issues are then weighed in the context of the existing legal framework in India which eventually highlights the grey areas in the legal realm that the concerned authorities like the legislature, RBI, and financial institutions should ponder upon to ensure the balance between innovation and justice.