The Reserve Bank of India (RBI) on June 24, 2026, issued the notification regarding the draft ‘Guidance on Regulatory Principles for Model Risk Management’.
The following has been stated namely: -
• The draft "Guidance on Regulatory Principles for Model Risk Management" has been released for public consultation to strengthen governance, oversight, and risk management of models used by regulated entities.
• The guidance covers commercial banks, small finance banks, payment banks, regional rural banks, co-operative banks, All India Financial Institutions, NBFCs, Asset Reconstruction Companies (ARCs), and Credit Information Companies (CICs).
• The framework applies to all models used by regulated entities, including third-party models and those based on Artificial Intelligence (AI) and Machine Learning (ML), across their entire lifecycle.
• RBI noted the growing use of models in business and decision-making. Weak governance or controls can lead to financial, operational, compliance, and reputational risks, making robust model risk management essential.
• Stakeholders can submit feedback until July 24, 2026, through the 'Connect 2 Regulate' section on RBI's website, or via post/email to RBI with the subject: "Feedback on Guidance on Regulatory Principles for Model Risk Management."
[Notification No. 2026-2027/528]
