RBI proposes guidelines for banks to manage AI risks

By Gopika Gopakumar

MUMBAI, ‌June 24 (Reuters) - ​India's ​central bank has proposed rules requiring banks to strengthen oversight of ‌risks tied to AI and machine-learning models, ⁠mandating board-approved policies, stronger controls and model inventories.

The ‌Reserve Bank of India ‌said banks must put in place a board-approved risk management framework covering all models, ​including those for AI and machine-learning.

Regulated entities must assess risk at both the ⁠individual model level and across the enterprise on an ongoing ​basis, the RBI said.

If risks are found to be excessive, lenders should ​take timely corrective steps, including ‌enhanced controls, restrictions on use, remediation or decommissioning of the model, ⁠and submit a report to the board's risk management committee, the bank added.

The RBI also ⁠said banks should ensure all models, including third-party models, ​are subject to independent validation.

Banks should establish human oversight for AI models used in automated decision-making, the ‌draft guidelines said. For generative AI models that interface with customers ‌or external users, additional cybersecurity controls should ⁠be implemented.

RBI has ‌invited feedback on ​the draft guidelines by July 24.

(Reporting by Gopika Gopakumar; Editing by Shailesh ‌Kuber)

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