The Reserve Bank of India (RBI) has issued final amendment directions to rationalise board matters, effective October 1, 2026. According to reports from The Hindu BusinessLine, The Economic Times, NDTV Profit, and Mint, the revised framework introduces a principle-based approach that replaces the existing seven broad board agenda themes with five principles of ultimate responsibility, clear articulation, agenda leadership, information flow and periodic review. The amended directions require boards to explicitly define matters reserved for their approval and periodically review delegated powers, with the framework applying to both public sector banks (PSBs) and private sector banks (PVBs) to ensure a level playing field in governance standards. The new rules are designed to facilitate smoother operations for lenders while maintaining stringent oversight on key aspects including compliance and risk assessment. The implementation timeline was extended by one month following stakeholder feedback on the draft guidelines issued on April 8.
Under the new framework, boards will continue to bear ultimate responsibility for the bank's business strategy, financial soundness, governance structure, key personnel decisions, internal organisation and governance structure and practices. As reported by The Hindu BusinessLine, The Economic Times, NDTV Profit, and Mint, the board shall exercise oversight over risk management, policy and strategy, exposures to related entities, and conformity with corporate governance. The Chairperson of the Board shall have the primary responsibility for setting the agenda of meetings, with boards required to ensure they receive sufficient information from management to discharge their role effectively. The board shall specify the nature and frequency of information required from management and may seek external reports if needed. The RBI has rejected suggestions seeking continuation of the 'action taken report' mechanism, with the central bank declaring that boards are best placed to determine appropriate mechanisms for monitoring execution. While some stakeholders argued that Action Taken Reports improve accountability by tracking the implementation of board decisions, the RBI declined to make them mandatory.
The revised framework mandates that boards articulate matters reserved for their approval and ensure adequate time is devoted to strategy and risk governance. According to the amended norms reported by The Hindu BusinessLine, The Economic Times, NDTV Profit, and Mint, boards may delegate specified matters to board committees or management committees, subject to clearly defined reporting requirements. The board shall periodically review matters to be placed before it as well as matters delegated to Board Committees/Management Committees, including timeliness of circulation, adequacy of information captured in the agenda, and time allotted for important matters. The framework requires boards to clearly articulate the matters reserved for its approval or to be brought to its notice for information or reporting. The new rules adopt a principles-based approach that focuses on giving bank boards the freedom to formulate their agendas based on each bank's specific priorities. The RBI has accepted industry feedback to drop the requirement for boards to define what constitutes a 'material amendment' to policies before delegating their review, though it rejected suggestions to allow board committees flexibility in deciding review frequency.
The new framework extends governance provisions applicable to public sector banks (PSBs) to private sector banks (PVBs), with suitable modifications. As reported by The Hindu BusinessLine, The Economic Times, NDTV Profit, and Mint, the responsibilities of boards and revised governance practices prescribed under the directions will apply to private lenders on a mutatis mutandis basis. The framework retains board approval for key policies such as credit, investment, risk management, digital banking, IT, deposit/other liability products, fit & proper assessment of major shareholders, compensation, and CSR, while permitting delegation of specified aspects to board committees. The RBI has done away with the requirement to define materiality based on stakeholder feedback, with the expectation that the entire board would be consulted for setting the agenda of the meeting, though the primary responsibility should rest with the chairperson. The regulator has strengthened the requirement that boards clearly identify matters reserved for their approval or reporting and ensure adequate time is devoted to strategy and risk governance, accepting suggestions to make this provision mandatory rather than discretionary.
Matters requiring continued board approval include capital planning, dividend declaration, voluntary amalgamation, appointment of the managing director and chief executive officer (MD & CEO), chief risk officer (CRO), and chief compliance officer (CCO). According to The Hindu BusinessLine, The Economic Times, NDTV Profit, and Mint, policies that are required to be placed before the Board for approval include those related to credit, investment, risk management, digital banking, IT, deposit/other liability products, fit & proper assessment of major shareholders, compensation, and CSR. Policies in respect of which Board approval can be delegated include responsible business/lending conduct, opening and merging of banking outlets, appointment of statutory auditors for overseas branches, and annual banking outlet expansion plans. Matters other than policies that need to be placed before the board include capital plan, infusion of capital in overseas banking centres, acquisition of shares or voting rights, issuance of regulatory capital, and reclassifications between investment categories. The RBI has rejected suggestions to retain a mandatory requirement for placing regulatory developments before the board, saying keeping directors updated is the responsibility of a bank's compliance and secretarial functions and does not require a separate regulatory mandate.
