RBI issues draft ‘Guidance on Regulatory Principles for Model Risk Management’

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June 24, 2026 RBI issues draft ‘Guidance on Regulatory Principles for Model Risk Management’ 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 The draft Guidance is applicable to following regulated entities: (i) Commercial Banks (ii) Small Finance Banks (iii) Payments Banks (iv) Local Area Banks (v) Regional Rural Banks (vi) Urban Co-operative Banks (vii) Rural Co-operative Banks (viii) All India Financial Institutions (ix) Non-Banking Financial Companies (x) Asset Reconstruction Companies (xi) 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 Comments on the draft Guidance are invited from regulated entities, members of public and other stakeholders by July 24, 2026.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’ प्रेस प्रकाशनी PRESS RELEASE भारतीय ǐरज़वर् बैंक RESERVE BANK OF INDIA वेबसाइट : www.rbi.org.in/hindi संचार ͪ वभाग, केंद्रȣय कायार्लय, शहȣद भगत ͧ संह मागर्, फोटर्, मुंबई - 400 001 Website : www.rbi.org.in Department of Communication, Central Office, Shahid Bhagat Singh Marg, Fort, ई-मेल/email : helpdoc@rbi.org.in Mumbai - 400 001 फोन/Phone: 022 - 2266 0502 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) Press Release: 2026-2027/528 Chief General Manager