Improving The Effectiveness Of Operational Risk Management Of Regulated Entities ("REs")

RBI, vide circular dated April 30, 2024, has issued a Guidance Note on Operational Risk Management and Operational Resilience (“Guidance Note”), focusing on operational resilience as an outcome of operational risk management. The Guidance Note is applicable to all commercial banks, non-banking financial companies (“NBFCs”), co-operative banks, and all India financial institutions. With the issuance of this Guidance Note the Guidance Note on Management of Operational Risk dated October 14, 2005, stands repealed. Through this Guidance Note, the RBI intends to:

1. bring in place a 3 (three) line defence model for the REs, where business unit will form the first line of defence, followed by organizational operational risk management function (including compliance function) and audit function forms the third line of defence;