RBI has issued draft regulatory guidelines on model risk management

Traders Union
All News
Central Banks
RBI model risk guidelines

Highlights

RBI has invited comments on the draft 'Guidance on Regulatory Principles for Model Risk Management' until July 24, 2026, which will apply to all major regulated financial institutions.
The draft guidelines clarify the regulatory scope and risk management expectations for all types of models, including third-party, AI, and machine learning models.
RBI has presented a comprehensive regulatory framework, emphasizing the need for control and governance over the increasing use of AI-based models.

This article was translated from the original. Read the original version by our correspondent here.

Consultation Process and Regulatory Scope

According to the RBI press release, the central bank has invited comments on the draft document titled ‘Guidance on Regulatory Principles for Model Risk Management’ until July 24, 2026. Feedback is invited from regulated entities, the general public, and other stakeholders, and can be submitted via the ‘Connect 2 Regulate’ section of the RBI website, by email, or by post.

This draft applies to commercial banks, small finance banks, payments banks, local area banks, regional rural banks, urban cooperative banks, rural cooperative banks, all-India financial institutions, non-banking financial companies, asset reconstruction companies, and credit information companies. The scope of the guidelines covers all models used by these entities, including third-party models and AI or machine learning-based models.

Emphasis on Risk Control Amid Rising AI Adoption

The central bank has stated that the use of models in various business and decision-making processes within institutions has increased rapidly. According to the RBI, weaknesses in the governance, monitoring, risk management, and control of these models can create financial, operational, compliance, and reputational risks.

Earlier, on August 5, 2024, the RBI had issued draft regulatory principles on model risk management in the lending sector. Subsequently, on August 13, 2025, the committee on responsible and ethical AI enablement, FREE-AI, released its report, and the new draft presents a more comprehensive framework aimed at setting broad regulatory expectations across the entire model lifecycle.

Our previous report discussed BrainSightAI’s AI-powered brain mapping technology, which helps make decisions and navigation in neurosurgery more precise by converting standard MRI scans into surgery-ready 3D brain network maps. We also reported that after obtaining the CDSCO license, the company accelerated its hospital deployments and is now working towards further expansion and regulatory approvals.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.