Introduction
Over the years, the board agendas of Indian commercial banks have grown heavy. Many separate directions, master circulars and guidance notes each required a particular policy, report or approval to go to the Board of Directors. Every requirement made sense when it was issued, but taken together they meant boards spent much of their limited meeting time on routine approvals and compliance reporting. Strategic and risk questions, which only the board can properly answer, received less attention as a result.
The Reserve Bank of India responded with the Reserve Bank of India (Commercial Banks – Governance) Amendment Directions, 2026 (RBI/2026-27/177, DOR.HGG.GOV.150/29.67.001/2026-27), issued on July 14, 2026. They amend the Reserve Bank of India (Commercial Banks – Governance) Directions, 2025 and came into force on October 1, 2026. Their stated purpose is to help bank boards use their time effectively and to allow more focused, qualitative engagement on strategy and risk governance. The method is a complete review of every existing RBI direction and circular that requires a matter to be placed before the Board.
The Regulatory Basis and Purpose of the Amendment
The RBI issued the Amendment Directions under Section 35A of the Banking Regulation Act, 1949, and all other provisions enabling it in this regard. Section 35A allows the Reserve Bank to issue binding directions to banking companies when it is satisfied that doing so is necessary and expedient in the public interest. The Amendment Directions record that satisfaction expressly.
The amendment does not dilute board accountability. It changes how that accountability is exercised. The RBI’s approach is that a board loaded with procedural approvals is less effective than one that keeps the decisions only it can take and supervises the rest through committees and structured reporting. The amendment therefore does three things. It reorganises the oversight provisions in Chapter II of the Governance Directions. It creates one consolidated framework identifying what must go before the Board. And it sets out the principles boards must apply when deciding their own agendas.
Recasting the Board’s Oversight Function Through Paragraph 11A
The first structural change concerns the oversight responsibilities of the Board of a Public Sector Bank (PSB). Paragraph 15 of Chapter II has been deleted and moved, as new paragraph 11A, so that it now sits next to the provisions on the Board’s core responsibilities. Under paragraph 11A, the Board must exercise oversight over three areas.
The first is the risk management system, policy and strategy followed by the bank. The second is exposures to related entities, including lending to and investment in subsidiaries and the asset classification of those exposures. The third is the bank’s conformity with corporate governance standards, which covers the composition, role and functions of committees, how often they meet, and whether they carry out their coverage and review functions.
The relocation matters. By grouping these oversight obligations with the Board’s primary responsibilities rather than with procedural provisions on board practices, the RBI signals that risk strategy, related-entity exposures and committee effectiveness are central board duties. Paragraphs 14, 16, 17, 18 and 19 of Chapter II have been deleted at the same time. Their place is taken by the consolidated framework described below.
A Consolidated Framework for Board Matters Under Paragraph 19A
The main change is a new sub-section B1, titled “Matters to be placed before the Board”, added after paragraph 19 of Chapter II. Its first provision, paragraph 19A, begins with a non-obstante clause. It applies “notwithstanding anything contained in extant RBI circulars or directions.” This gives the new framework priority over the many separate board-placement requirements spread across earlier regulatory instruments.
Paragraph 19A works through three appendices. Appendix I lists the policies that need Board approval and states which of those approvals may be delegated. Paragraph 19A also adds a significant relaxation: once the Board has approved a policy, its periodic review may be delegated to Board Committees, and the Board need approve only material amendments. Appendix II A lists matters other than policies that must be placed before the Board for approval, review or information. Appendix II B lists non-policy matters the Board may, at its discretion, delegate.
The appendices are drafted with flexibility. Banks may regroup policies as they see fit, provided every listed aspect is covered in one or more policies. Requirements dealing with similar matters have been listed only once to avoid duplication. Where the appendices say a matter “can be delegated”, this means delegation at the discretion of the Board, not delegation as a matter of right.
Guiding Principles for Determining the Board Agenda Under Paragraph 19B
The RBI has recognised that no list can anticipate every matter a board may need to consider. Paragraph 19B therefore sets out key principles for deciding what else should go before the Board.
The first principle restates the Board’s ultimate responsibility. The Board remains answerable for the bank’s business strategy and financial soundness, key personnel decisions, internal organisation and governance structure, and risk management and compliance obligations. It may delegate specific matters to Board Committees or Management Committees, but must attach suitable reporting requirements so that delegation does not weaken oversight.
The second principle requires the Board to set out clearly which matters it reserves for its own approval and which must be brought to its notice for information or reporting. In doing so it must take into account the roles given to it by various statutes and regulations, and it must ensure that enough time is given to strategy and risk governance. This is where the purpose of the amendment becomes an operative obligation.
The third principle gives the Chairperson primary responsibility for setting the meeting agenda. Clear ownership of the agenda helps ensure that the Board’s priorities, rather than the management’s preferences, decide what is discussed.
The fourth principle concerns the flow of information. The Board must ensure it receives enough information from management to discharge its role, must specify the nature and frequency of that information, and may seek external reports where necessary. This reduces the risk of a board depending entirely on what management chooses to present.
The fifth principle requires periodic self-review. The Board must regularly review both the matters placed before it and the matters delegated to committees. That review must also cover how promptly agenda items are circulated, whether the agenda papers contain adequate information, and how much time is allotted to important matters. Taken together, these principles make the Board responsible for the quality of its own deliberations, not merely for completing a list of required approvals.
Policies Requiring Board Approval and the Scope for Delegation
Appendix I identifies nineteen broad policy heads. Its main feature is a clear distinction between policies the Board must approve itself and those whose approval may be delegated.
Policies central to prudential soundness generally remain with the Board. The credit policy cannot be delegated. It covers credit facilities under the Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025; the transfer and acquisition of loan exposures under the Transfer and Distribution of Credit Risk Directions, 2025; the resolution of stressed assets; the treatment of wilful and large defaulters; and income recognition, asset classification and provisioning norms. There is one narrow exception: paragraph 13A(3) of the Resolution of Stressed Assets Second Amendment Directions, 2026 may be delegated.
The investment policy under the Classification, Valuation and Operation of Investment Portfolio Directions, 2025 also remains with the Board in full. The same applies to the compensation policy for directors, chief executive officers and material risk takers, the criteria for paying fixed remuneration to non-executive directors under the Governance Directions, the KYC-sensitive core of the Know Your Customer policy, the compliance policy, the protected disclosure scheme, the disclosure policy, the code of conduct, the CSR and donations policy, and the fit and proper criteria for major shareholders under the Acquisition and Holding of Shares or Voting Rights Directions, 2025.
The risk management policy shows the most graded approach. Credit risk, concentration risk, cyber security, fraud risk governance under the Master Directions on Fraud Risk Management of July 15, 2024, overseas borrowings, and the roles of the Chief Risk Officer under paragraphs 29 and 31 of the Governance Directions all remain non-delegable. Within market risk, operational risk, liquidity risk and stress testing, however, the RBI has allowed delegation of particular components to specified bodies.
Under the Asset Liability Management Directions, 2025, for example, the matter in paragraph 10 may be delegated to any committee with delegated powers, the matter in paragraph 13 to the Risk Management Committee of the Board, and the matter in paragraph 14 to the Asset Liability Committee. This matching of each component to the committee best placed to handle it shows how carefully the delegation scheme has been calibrated.
Wider delegation is permitted for operational and customer-facing policies. Approval of the business conduct policy under the Responsible Business Conduct Directions, 2025, the credit and debit card policy, the opening, merging, shifting and closure of banking outlets under the Branch Authorisation Directions, 2025, the Gold Monetization Scheme, and the acceptance of Form A2 in online mode for outward remittances may each be delegated to a committee holding delegated powers.
Policies on the appointment and remuneration of statutory central auditors and statutory branch auditors may be delegated to the Audit Committee of the Board. By contrast, engaging Business Correspondents, engaging forex correspondents under Regulation 12 of Chapter VI of the Foreign Exchange Management (Authorised Persons) Regulations, 2026, the green deposits framework, digital payment security controls, prepaid payment instruments, and the IT governance policy under the Master Direction of November 7, 2023 remain with the Board.
Non-Policy Matters for Board Approval, Review and Information
Appendix II A applies the same consolidation to matters other than policies. The matters reserved for Board approval are those that change the bank’s capital, ownership, structure or senior leadership. They include the structural design of the Internal Capital Adequacy Assessment Process (ICAAP), the capital plan, capital infusion in overseas centres, the issue of regulatory capital instruments such as perpetual debt instruments, preference shares and Tier 2 debt under the Prudential Norms on Capital Adequacy Directions, 2025, the declaration of dividends, and approval of voluntary amalgamation.
Senior appointments also remain with the Board: the appointment or reappointment of the Managing Director and CEO, the remuneration and number of whole-time directors, and the appointment of the Chief Risk Officer and the Chief Compliance Officer. Reclassification of investments between Held to Maturity, Available for Sale and Fair Value through Profit and Loss categories, the launch of new OTC derivative products, and RTGS membership are also retained for Board approval, because each carries significant balance-sheet or systemic consequences.
Matters for Board review include the working of the bank’s subsidiaries, material ITEs under the Concentration Risk Management Directions, 2025, the bank’s compensation system, the assessment under ICAAP, the annual implementation of exposure management measures, and business placed through brokers above the five per cent limit.
Matters reported for information include compromise settlements and technical write-offs under paragraph 94 of the Resolution of Stressed Assets Directions, 2025, loans to related parties, the fit and proper status of major shareholders, the outcome of stress tests, and monitoring of share encumbrance in line with Section 12B(5) of the Banking Regulation Act, 1949. Keeping the encumbrance reporting with the Board is significant. Section 12B concerns the acquisition and holding of significant shareholdings in banking companies, and the Board’s continuing awareness of encumbered shares is directly relevant to control and ownership risk.
Matters That May Be Delegated to Board Committees
Appendix II B lists matters the Board may delegate at its discretion. In most cases it names the committee best suited to receive them. The Audit Committee of the Board may approve the risk assessment methodology for risk-based internal audit, the annual audit plan, the appointment of statutory auditors for overseas branches, and special assignments other than statutory audit. It may also review the Long Form Audit Report, the effectiveness of risk-based internal audit, compliance risk reports and fraud risk incidents. The Risk Management Committee may review country risk exposures, the investment portfolio and the bank’s liquidity risk profile. The Asset Liability Committee may handle the base rate, and the Customer Service Committee may review doorstep banking services.
Some delegations are notable because they involve conflict-of-interest situations. Sanction of loans to directors, directors of other banks and their relatives under paragraph 42K of the Credit Risk Management Directions, 2025 may be delegated to the Committee on Lending to Related Parties. The authorisation and oversight of service providers owned or controlled by directors or key managerial personnel may be delegated to any Board Committee.
Compromise settlements with borrowers classified as fraud or wilful defaulters may be delegated to the Management Committee of the Board, except where that committee itself originally sanctioned the exposure. This exception prevents a committee from approving the settlement of a loan it granted, so the integrity of the decision is protected even though the matter has left the full Board.
Extension of the Framework to Private Sector Banks
Although Chapter II of the Governance Directions is written for Public Sector Banks, the amendment makes clear that the reforms also apply to Private Sector Banks (PVBs). Paragraph 52 of Chapter III, as amended, applies the responsibilities of a PSB Board in paragraphs 8 to 11A, mutatis mutandis, to the Board of a PVB, so the new oversight obligations in paragraph 11A bind private bank boards as well. Paragraph 57, as amended, likewise applies the provisions on board structure and practices in paragraphs 12 to 19B to PVBs. The consolidated board-matters framework and the agenda-setting principles therefore govern public and private sector banks equally, subject only to the adjustments that their different ownership structures require.
Commencement and Consequential Modification of Underlying Directions
The Amendment Directions came into force on October 1, 2026. From that date, the directions and circulars listed in the appendices stand modified to the extent indicated. Entries marked with the symbol “#” are those where the underlying direction or circular itself is altered in line with the position taken in the appendix. In practice, many existing provisions that previously required Board approval or review now permit delegation without any separate amendment to each source instrument. This consequential modification, together with the non-obstante clause in paragraph 19A, removes any conflict between the new framework and the earlier requirements it replaces.
Conclusion
The Reserve Bank of India (Commercial Banks – Governance) Amendment Directions, 2026 change how bank boards are expected to work. The RBI has consolidated scattered board-placement requirements into one framework, given that framework priority over earlier circulars, and permitted carefully matched delegation to specialised committees. The aim is to free board time for the questions that matter most. The amendment does not reduce the Board’s ultimate responsibility.
Instead, it requires boards to define their reserved matters, control the information they receive and regularly assess the quality of their own deliberations. For both public and private sector banks, compliance now depends less on how many items reach the Board and more on whether the Board’s attention is directed to strategy and risk.
These governance changes complement the revised risk management requirements under the RBI Commercial Banks Risk Amendment Directions, 2026.
