RBI allows banks to delegate routine board approvals, seeks greater focus on strategy and risk

The Reserve Bank of India has amended its governance directions for commercial banks, introducing a consolidated framework that streamlines the matters requiring Board attention and expands the scope for delegating routine decisions to Board committees.

The central bank said the move is intended to enable Boards to utilise their time more effectively and facilitate "a more focused and qualitative engagement on strategy and risk governance." The amendments will take effect from October 1, 2026.

According to the RBI, the review seeks to rationalise the numerous directions and circulars governing matters required to be placed before Boards so that directors can focus more on strategic decision-making and risk oversight rather than routine operational approvals.

What is the new framework?

The framework categorises matters into:

Policies requiring Board approval;
Non-policy matters requiring Board approval, review or information; and
Matters that may be delegated to Board Committees at the Board's discretion.

What can now be delegated?

The RBI has identified several routine matters that Boards may delegate to Board Committees, depending on their governance structure.

These include annual audit plans, risk-based internal audit methodology, annual banking outlet expansion plans, cyber security reviews, investment portfolio reviews, outsourcing oversight, business correspondent reviews, fraud reviews, operational risk reporting, liquidity risk reporting and certain customer service matters.

What will continue to require Board approval?

Strategic and material decisions will continue to remain with the Board.

These include approval of credit, investment, risk management, IT, digital banking, outsourcing, KYC, compliance and compensation policies, besides capital plans, dividend declaration, appointment of the MD & CEO, Chief Risk Officer and Chief Compliance Officer, voluntary amalgamations and issuance of regulatory capital instruments.

What principles has RBI prescribed for Boards?

The RBI said Boards will continue to bear ultimate responsibility for a bank's business strategy, financial soundness, governance structure, key personnel decisions, risk management and compliance obligations, even where powers are delegated.

Boards must clearly identify matters reserved for their approval, determine the information they require from management, and periodically review both the matters placed before them and those delegated to committees.

What role will the Chairperson play?

The amendments assign the Chairperson primary responsibility for setting the Board agenda. Boards must also ensure that sufficient time is devoted to discussions on strategy and risk governance, while periodically reviewing the quality and timeliness of agenda papers and information received from management.