RBI's own words: “With the issuance of this Guidance Note the “ Guidance Note on Management of Operational Risk” dated October 14, 2005 , stands repealed.” — RBI/2024-25/31
Source: Reserve Bank of India · RBI/2005-06/180 · issued 14 Oct 2005 · ~1 min read
Quick answerRBI issued a Guidance Note on Management of Operational Risk, requiring banks to maintain capital for operational risk under the Basic Indicator Approach per draft guidelines of February 15, 2005. Banks may use the note to upgrade risk management systems, treating its systems, procedures, and tools as indicative, and adapting to changes.
The rule, in the simplest words
Banks in India must maintain capital for operational risk as per the Basic Indicator Approach.
Risk management systems should be designed according to each bank's needs and adaptable to changes.
The systems, procedures, and tools in the Guidance Note are only examples and can be adjusted.
How it plays out — a real example
Rajesh, a risk management officer in Mumbai, used the revised Guidance Note to upgrade his bank's risk management system, making sure it could adapt to changes in the market and the introduction of new products.
What changed
RBI released a revised Guidance Note on Management of Operational Risk, updating a draft from March 11, 2005, after incorporating feedback from banks. The revised note is now available on the RBI website.
What it means for you
Banks may use the note to upgrade risk management systems, which should be oriented to their own requirements and adaptable to changes. Capital for operational risk under the Basic Indicator Approach is required per the February 15, 2005 draft guidelines.
Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.
What banks were required to do at the time
Review the revised Guidance Note on RBI's website and use it to upgrade your risk management systems.
Ensure your risk management systems are adaptable to changes in business, size, market dynamics, and innovative products.
Maintain capital for operational risk as per the Basic Indicator Approach as outlined in the draft guidelines on the New Capital Adequacy Framework issued on February 15, 2005.
Who it affects
All scheduled commercial banks in India, Risk management departments, Compliance and capital planning teams
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
Is the Guidance Note mandatory for banks?
The systems, procedures, and tools prescribed in the note may be treated as indicative. Banks should design risk management frameworks based on their own size, complexity, risk philosophy, market perception, and expected capital level, but must be adaptable to changes.
What is the capital requirement for operational risk under this note?
Banks must maintain capital for operational risk using the Basic Indicator Approach, as per the draft guidelines on the New Capital Adequacy Framework issued on February 15, 2005.
📜 This document’s life story (3 recorded events, each backed by RBI’s own words)
RBI’s words: “With the issuance of this Guidance Note the “ Guidance Note on Management of Operational Risk” dated October 14, 2005 , stands repealed.”
RBI’s words: “This Guidance Note updates the “ Guidance Note on Management of Operational Risk” dated October 14, 2005 .”
📜 Read the original circular — full text as issued by RBI
RBI/2005-06/180
DBOD.No.BP.BC.39/ 21.04.118/2004-05
October 14, 2005
To
The Chairman
All Scheduled Commercial Banks
Dear Sir,
Guidance Note on Management of Operational Risk
1. As you are aware, The Basel Committee on
Banking Supervision (BCBS) released the 'International Convergence of Capital
Measurement and Capital Standards – A Revised Framework' in June 2004. In terms
of the draft guidelines on implementation of the New Capital Adequacy Framework
issued on February 15, 2005, banks in India are required to maintain capital
for operational risk as per the Basic Indicator Approach. As a step towards
enhancing and fine tuning management of operational risk, a draft guidance note
based on the inputs of the Working Group, consisting of senior officials from
select banks, were issued to banks vide DBOD.No.BP.1365/21.04.118/2004-05
dated March 11, 2005 .
2. Comments on the Guidance Note were received
from a wide spectrum of banks. The draft Guidance Note has been revised in the
light of the feedback received and the revised
Guidance Note is now placed on the website of RBI ( http://www.rbi.org.in ).
3. Banks may use this Guidance Note for upgrading their risk
management systems. The design of risk management framework should be oriented
towards the banks' own requirements dictated by the size and complexity of business,
risk philosophy, market perception and the expected level of capital. The systems,
procedures and tools prescribed in the Guidance Note for effective Management
of Operational Risk may therefore be treated as indicative. The risk management
systems in the banks should, however, be adaptable to changes in business, size,
the market dynamics and introduction of innovative products by banks in future.
4. Please acknowledge receipt
Yours faithfully,
(Anand Sinha)
Chief General Manager-in-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2005-06/180 · issued 14 Oct 2005. The plain-English explanation above is BankPulse’s own independent summary.
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BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=2533&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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