The Reserve Bank of India (RBI) has issued updated guidelines aimed at rationalizing matters presented for consideration by bank boards of directors. The goal of these changes is to improve the efficiency of board time utilization and encourage deeper, more focused attention on strategy and risk management issues.
New Requirements for Board Operations
Under the amended directives, boards of directors are required to clearly define the issues reserved for their approval and regularly review delegated authorities. This revised regulation will come into effect on October 1, 2026.
Within the new norms, boards will oversee risk management, policy and strategy exposure of affiliated entities, as well as compliance with corporate governance standards, among other duties. The RBI emphasized that 'the chairman of the board bears the primary responsibility for setting the meeting agenda.'
Accountability and Information
The regulator stated that boards continue to hold ultimate responsibility for the bank's business strategy, financial stability, management system, key personnel decisions, risk management, and regulatory compliance. The directives also oblige boards to ensure they receive sufficient and timely information from management to effectively perform their functions. Boards must specify the nature and frequency of information provided by management. Furthermore, the RBI added that 'the board may request external reports if necessary.'
Delegation and Process Review
Boards may delegate certain matters to board committees or management committees, provided there are clearly defined reporting requirements. They are also instructed to clearly formulate issues left for their approval and guarantee sufficient time is allocated for discussing strategy and risk management.
The RBI indicated that 'the board must periodically review the matters presented to it, as well as those delegated to the boards/management committees.' Such a review must assess the timeliness of agenda distribution, the adequacy of information accompanying the agenda documents, and the time allocated to important topics.
Expansion of Regulation and Maintenance of Control
The updated regulation extends corporate governance provisions, previously applicable to Public Sector Banks (PSBs), to Private Sector Banks (PVBs) with corresponding modifications. The responsibilities of the boards and the new management practices established in the directives apply to private lenders on a similar basis. The regulation maintains the requirement for board approval of key policies, including credit, investment, risk management, outsourcing, digital banking, information technology, responsible business conduct, deposits, compensation, KYC, and disclosure, as well as important structures such as compliance and fitness & propriety (F&P) assessments for major shareholders, Corporate Social Responsibility (CSR), and whistleblowing schemes. Nevertheless, it allows for the delegation of certain aspects to board committees if deemed appropriate.
Similarly, matters concerning capital planning, dividend announcements, voluntary mergers, and the appointment of Managing Director, Chief Executive Officer, Chief Risk Manager, and Chief Compliance Officer continue to require board approval.