The RBI’s Amendment Directions apply to both public sector banks and private sector banks, ensuring a level playing field in governance standards
The Reserve Bank of India (RBI) will usher in a principle-based framework for banks, empowering their Boards to delegate routine matters to committees while retaining the ultimate accountability for business strategy, financial soundness and key personnel decisions.level playing fieldThis is aimed at enabling the Boards to utilise their time effectively and to facilitate a more focused and qualitative engagement on strategy and risk governance. The RBI’s Amendment Directions on ‘Matters to be placed before the Boards of the Banks’, which are effective from October 1, apply to both public sector banks (PSBs) and private sector banks (PVBs), ensuring a level playing field in governance standards.With this, the central bank is seeking to replace the extant seven broad board agenda themes (business strategy, risk, financial reports and their integrity, compliance, customer protection, financial inclusion and human resources) with principle-based guidance (entailing five principles of ultimate responsibility, clear articulation, agenda leadership, information flow and periodic review).The Board has the ultimate responsibility for the bank’s business strategy and financial soundness, key personnel decisions, internal organisation and governance structure and practices; and risk management and compliance obligations, per the directions.It may, however, delegate certain matters to the Board committees/management committees, along with reporting requirements as may be necessary. The Board will be required to clearly articulate the matters reserved for its approval or to be brought to its notice for information or reporting. However, the Board shall ensure that sufficient time is dedicated to strategy and risk governance.The RBI said the Chairperson of the Board shall have the primary responsibility for setting the agenda of the meeting. The Board has to ensure that it receives sufficient information from the management to discharge its role effectively. It shall specify the nature and frequency of information required from the management. The Board may seek external reports, if needed.The Board shall periodically review the matters to be placed before it as well as the matters delegated to the Board committees / management committees. The review shall also include the timeliness of circulation of agenda items, adequacy of information captured in the agenda and time allotted for important matters.”Policies that are required to be placed before the Board for approval include policies related to credit, investment, risk management, digital banking, IT, deposit/ other liability products, fit & proper assessment of major shareholders, compensation, and CSR, among others.Policies in respect of which Board approval can be delegated include responsible business/lending conduct, including customer service specifically related to business conduct, and conduct and issuance of credit/debit cards; opening, merging, shifting, conversion and closure of banking outlets/offices/mobile banking facilities; and appointment/engagement of auditors/statutory branch auditors (SBAs).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; reclassifications between investment categories; new over the counter (OTC) derivative products; and declaration of dividend, approval by Board of Directors in case of voluntary amalgamation, among others.Matters other than policies that may be delegated at the discretion of the Board include Sanction of loans to Directors / Directors of other banks and their relatives; appointment of statutory auditors for overseas branches; annual banking outlet expansion plan (ABOEP); establishing new correspondent banking relationships; compromise settlements in respect of debtors classified as fraud or wilful defaulter (excluding cases originally sanctioned by the management committee of the Board, among others.Published on July 14, 2026
