The Reserve Bank of India has released draft guidance on regulatory principles for model risk management for public consultation. The proposal sets broad regulatory expectations for governance, oversight, risk management and controls across the full model lifecycle, reflecting the wider use of models by regulated entities in business and decision-making processes. It applies to all models, including third party models and those using artificial intelligence and machine learning. The draft covers commercial banks, small finance banks, payments banks, local area banks, regional rural banks, urban co-operative banks, rural co-operative banks, All India Financial Institutions, non-banking financial companies, asset reconstruction companies and credit information companies. The Reserve Bank links the proposal to the expansion of model use beyond credit and to risks arising from weak governance and controls, which it says can expose firms to financial, operational, compliance and reputational risks. The release follows the August 5, 2024 draft 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. Comments on the draft are invited until July 24, 2026.
Reserve Bank of India2026-06-24
Reserve Bank of India launches consultation on model risk management guidance covering AI and third party models
The Reserve Bank of India has issued draft guidance on model risk management for consultation. It sets lifecycle-wide expectations for governance, oversight and controls for all models used by a wide range of regulated entities, including third party and artificial intelligence or machine learning models. Comments are due by July 24, 2026.