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Informist, Monday, Aug 5, 2024

--RBI issues draft circular for management of model risks in credit 

--RBI seeks comment on mgmt of 'model risks in credit' norms by Sep 4 

MUMBAI – The Reserve Bank of India today released a draft circular on the management of potential risks arising from credit management models used by regulated entities. The central bank has sought comments on the circular from the public and stakeholders by Sep 4.

The draft aims to address potential risks and ensure robustness in models used by regulated entities as part of their credit management, including for credit appraisal, borrower scoring, pricing, and risk management, the central bank said in a release.

The draft norms state that regulated entities should have a policy approved by the board for all the models deployed, and they need to be developed either internally or sourced from an external third-party supplier.

The RBI said the circular will come into force within three months from the date of issuance. The new credit models adopted by the regulated entities will have to follow these guidelines and the existing models will have to be validated in terms of the laid-out guidelines within six months from the date of issuance of the circular, it said.  End

Reported by Kshipra Petkar

Edited by Saji George Titus

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