pc
nid 93490
Jun 25, 2026
pthandapani@vixio.com
India
Reserve Bank of India
horizon scanning
86% of draft length
draft in Generated
Generated
1910 charsIndia's Reserve Bank Issues Draft Guidance on Regulatory Principles for Model Risk Management
On June 24, 2026, the Reserve Bank of India (RBI) released draft guidance on regulatory principles for model risk management for public consultation. The guidance applies to commercial banks, small finance banks, payments banks, local area banks, regional rural banks, urban and rural co-operative banks, all-India financial institutions, non-banking financial companies, asset reconstruction companies, and credit information companies.
The RBI developed this guidance following its August 5, 2024 draft on regulatory principles for management of model risks in credit and the August 13, 2025 report of the Committee on Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI). The guidance addresses the significant expansion in model usage across regulated entities, particularly the increasing deployment of artificial intelligence and machine learning (AI/ML) models in business and decision-making processes. The RBI recognises that weaknesses in governance, oversight, risk management, and controls related to model usage expose regulated entities to financial, operational, compliance, and reputational risks. The new guidance provides holistic regulatory expectations for model risk management across the entire model lifecycle and applies to all models used by regulated entities, including third-party models and those employing AI/ML technologies.
Regulated entities, members of the public, and other stakeholders may submit comments on the draft guidance by July 24, 2026. Responses can be submitted through the Connect 2 Regulate section on the RBI's website or sent by email to the Chief General Manager, Operational Risk Group, Department of Regulation, at the RBI's Central Office in Mumbai, with the subject line "Feedback on Guidance on Regulatory Principles for Model Risk Management."
REFERENCES:
Reserve Bank of India Press Release: https://www.rbi.org.in/
Agent draft
Not run yet.
Published
1641 charsReserve Bank Of India Seeks Feedback on Draft Guidance on Regulatory Principles for Model Risk Management
The Reserve Bank of India (RBI) has is seeking feedback on its Draft Guidance on Regulatory Principles for Model Risk Management, 2026.
The draft guidance contains:
New definitions for key terms including "Model", "Model Risk", "Decommissioning", "Explainability", and specific roles such as "Model Approver", "Model Developer", "Model Owner", and "Model Validator".
Principles prescribing the establishment of a Board-approved Model Risk Management Framework (MRMF) for all regulated entities (REs), ensuring comprehensive oversight through three lines of defense: model owners, independent validators, and internal audit.
Specific rules governing a risk-based tiering system, mandating that models be classified based on their materiality and complexity, with 'high' risk models requiring explicit approval from the Risk Management Committee of the Board (RMCB).
Provisions outlining the necessity for an accurate, up-to-date inventory of all active, inactive, and decommissioned models, which must be retained for at least ten years post-decommissioning.
Directives for models employing Artificial Intelligence (AI) and Machine Learning (ML), demanding enhanced controls for transparency and explainability, and establishing strict human oversight mechanisms, including 'kill switches' and 'human-in-the-loop' arrangements, particularly for generative AI facing customers.
Administrative measures specifying that REs must independently validate third-party models and ensure contractual access to minimum technical documentation and audit rights.
Feedback may be submitted via the RBI's Connect2Regulate platform by July 24, 2026.