Reserve Bank of India has today released the draft ‘Guidance on Regulatory principles for Model Risk Management’ for public comments.

The draft Guidance is applicable to following regulated entities:

1. Commercial Banks

2. Small Finance Banks

3. Payments Banks

4. Local Area Banks

5. Regional Rural Banks

6. Urban Co-operative Banks

7. Rural Co-operative Banks

8. All India Financial Institutions

9. Non-Banking Financial Companies

10. Asset Reconstruction Companies

11. Credit Information Companies

2. Comments on the draft Guidance are invited from regulated entities, members of public and other stakeholders by July 24, 2026.

The comments / feedback may be submitted through the link under the ‘Connect 2 Regulate’ Section available on RBI’s website or alternatively be forwarded to:

The Chief General Manager, Operational Risk Group
Department of Regulation, Central Office
Reserve Bank of India
Shahid Bhagat Singh Marg, Fort
Mumbai – 400 001

Or

By e-mail with the subject line ‘Feedback on Guidance on Regulatory Principles for Model Risk Management’

Background and Objective

The Reserve Bank had issued the draft “Regulatory Principles for Management of Model Risks in Credit” on August 05, 2024, with a view to strengthen governance and risk management practices relating to use of models in credit, followed by report of the Committee on Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) on August 13, 2025. Considering model usage has expanded significantly and regulated entities are increasingly using models, including those employing Artificial Intelligence / Machine Learning (AI / ML), across various business and decision-making processes; weaknesses in their governance, oversight, risk management and controls may expose the regulated entities to financial, operational, compliance, and reputational risks. Recognising this, the Reserve Bank has today released draft ‘Guidance on Regulatory Principles for Model Risk Management’ which provides holistic and broad regulatory expectations for model risk management across the model lifecycle. The Guidance is applicable to all models used by regulated entities, including third party models and models employing AI / ML.

(Brij Raj)           
Chief General Manager

Model Risk Management guidance broadens regulatory expectations for AI, machine learning and third-party model governance. Reserve Bank of India has released draft Guidance on Regulatory Principles for Model Risk Management for public comments. The guidance applies to a wide range of regulated entities and covers all models used by them, including third-party models and models employing artificial intelligence or machine learning. It sets out broad regulatory expectations across the model lifecycle to strengthen governance, oversight, risk management and controls against financial, operational, compliance and reputational risks.