RBI has released a draft framework to guide regulated entities in managing risks associated with model usage, emphasizing accountability and lifecycle management.
Draft Guidance for Model Risk Management
The Reserve Bank of India (RBI) has introduced a draft regulatory framework focused on managing risks associated with the use of both traditional and AI/ML models by regulated entities. This guidance underscores the importance of governance and validation in bolstering financial sector resilience.
Key principles outlined in the draft include the need for comprehensive model governance, accountability, and firm lifecycle management practices to mitigate risks effectively. The emphasis on validation processes aims to ensure that models function as intended, minimizing potential financial discrepancies.
For legal and compliance professionals, this draft serves as a crucial resource for advising clients on best practices in model governance and risk management, especially in a rapidly evolving technological landscape.
