RBI proposes a comprehensive regulatory framework focusing on managing risks from traditional and AI/ML models used in the financial sector to enhance accountability and governance.
RBI Releases Guidance on Model Risk Management Framework
The Reserve Bank of India recently issued draft guidance concerning the regulatory principles for model risk management. This comprehensive framework is designed to address risks associated with both traditional financial models and those utilizing artificial intelligence and machine learning technologies.
The guidance emphasizes critical aspects such as governance, validation, accountability, and the lifecycle management of financial models. By proposing these principles, the RBI aims to bolster the resilience of the financial sector against potential modeling risks.
For practitioners in the financial services sector, adherence to this proposed framework will be essential. It highlights the increasing importance of robust risk management protocols, particularly as financial technologies rapidly evolve and integrate into traditional banking practices.
Citations
- Draft Guidance on Model Risk Management (2026) RBI