RBI’s draft guidelines push banks toward AI kill switches and board oversight
The Reserve Bank of India (RBI) on June 24, 2026, released the draft Guidance on Regulatory Principles for Model Risk Management, 2026 for public comments until July 24. The comprehensive framework applies to all models used by regulated entities — including commercial banks — covering the full lifecycle and placing special emphasis on AI/ML systems.
Immediate implications for banks are significant. Model risk moves from a largely operational or risk-management function to explicit board-level accountability. Banks must implement a Board-approved Model Risk Management Framework (MRMF), maintain a comprehensive model inventory (including spreadsheets and third-party tools that qualify under the broad definition), and adopt risk-based tiering.
For AI models, mandatory “kill switch” or instant override mechanisms, robust human oversight, customer disclosures, and protections against bias, hallucinations, and adversarial attacks become required. Third-party models — widely used by banks — remain the bank’s full responsibility, with enhanced contractual, validation, and oversight demands.
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