RBI Overhauls Bank Board Governance Framework With Principles-Based Approach From 1 October

The Reserve Bank of India (RBI) has finalised amendments to the rules governing what matters must be placed before bank boards, replacing a prescriptive seven-theme framework with a principles-based approach that gives boards more flexibility to set their own agendas while retaining accountability on critical areas.

The new directions take effect from 01 October 2026 and apply equally to public-sector and private-sector banks.

The shift moves away from the existing seven broad agenda themes like business strategy, risk, financial reports, compliance, customer protection, financial inclusion and human resources. It replaces them with five governing principles: ultimate responsibility, clear articulation, agenda leadership, information flow and periodic review.

What Boards Remain Responsible For

Under the revised framework, certain matters cannot be delegated and remain firmly with the full board:

• Business strategy and financial soundness

• Key personnel decisions

• Internal organisation and governance structure

• Risk management and compliance obligations

• Capital plan and capital infusion in overseas banking centres

• Acquisition of shares or voting rights

• New over-the-counter derivative products

• Declaration of dividends

• Approval in cases of voluntary amalgamation

What Can Be Delegated

Boards now have discretion to delegate certain matters to board committees or management committees, with appropriate reporting requirements:

• Customer service and business conduct policies

• Credit and debit card issuance conduct

• Opening, merging, shifting or closure of banking outlets

• Appointment of auditors and statutory branch auditors

• Annual banking outlet expansion plans

• Establishing new correspondent banking relationships

• Compromise settlements for fraud or wilful defaulter cases, subject to conditions

How The Agenda Process Changes

The chairperson of the board carries primary responsibility for setting the meeting agenda, though the RBI expects the full board to be consulted in that process. The board must specify what information it requires from management and how frequently and may seek external reports where needed.

It must also periodically review the matters placed before it, the timeliness of agenda circulation, the adequacy of information and the time allocated to important subjects.

The RBI dropped the action taken report mechanism that some stakeholders had sought to retain and has also removed the requirement to define materiality that existed under the earlier framework.

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