RBI proposes clarity on delegation by Bank’s Board
– Saloni Khant, Senior Executive | finserv@vinodkothari.com
With the advent of the new financial year, RBI marches on in its drive of regulatory reforms with the latest being the ‘Draft Reserve Bank of India (Commercial Banks – Governance) Amendment Directions, 2026’. The proposed amendments would primarily affect the delegation by the board of banks to its board and management committees. The existing Directions require the board to focus on seven broad themes and briefly provide an illustrative list of matters which can be delegated.
The proposed amendment brings a shift in approach. A list of matters and policies is specified where the Board’s approval/review is mandatory and where delegation is possible along with broad principles for delegation.
Currently applicable only to public sector banks, these norms are proposed to be extended to private sector banks as well.
In this piece, the author explains the proposed amendment and the possible actionables for Banks in the future.
Proposed Omissions
The current provisions of Reserve Bank of India (Commercial Banks – Governance) Directions, 2025 proposed to be omitted/substituted are as follows:
| Para | Provision | VKC Remarks |
| 14 | The Board should focus on the 7 themes of: Business Strategy, Risk, Financial Reports and their integrity, Compliance, Customer Protection, Financial Inclusion, Human Resources | This has been summarised to ‘the Board shall ensure that sufficient time is dedicated to strategy and risk governance.’ |
| 16 | Review of action taken on points arising from earlier meetings till the satisfaction of the board | Broader discretion provided to Banks to decide internal processes. |
| 17 | Placing regulatory communication from RBI and the government along with supplementary information before the Board | |
| 18 | Delegation expressly permitted for: Reviews dealing with various performance areas and only a summary on each of the reviews may be put up to the Board at periodic intervals; Monitoring of the exposures (both credit and investment) of the bank; Review of the adequacy of the risk management process and upgradation thereof; Internal control system; Ensuring compliance with the statutory / regulatory framework, etc. | A prescriptive list of permitted delegation has been specified by RBI here, refer discussion below. |
| 19 | Procedural technicalities relating to placing a summary of key observations by directors at the next board meeting and confirmation by directors for their observations, dissents etc. | Broader discretion provided to Banks to decide internal processes. |
Specified policies and matters allowed or disallowed for delegation
The proposed amendment expressly permits delegation in several matters and prohibits delegation in certain matters.
An illustrative list expressly permitting delegation:
| Provisions | Contents | Delegation to |
| Para 7(3) and 7(4) of RBI (Commercial Banks – Undertaking of Financial Services) Directions, 2025 | Where the bank intends to function as a Professional Clearing Member in commodity derivatives, approval of policy for-Specification of risk control measures and prudential norms for exposure limits for each trading member;Governing the bank’s exposure to trading members, ensuring consistency with the overall risk appetite and regulatory requirements. | Risk Management Committee |
| Para 7(2) and 7(3) of the RBI (Commercial Banks – Miscellaneous) Directions, 2025 | Approval of policy on- Courses / certifications required for specialised areas of operationsList of sensitive positions to be covered under mandatory leave requirements | Any Committee to which powers have been delegated by the Board. |
An illustrative list where delegation for approval of the policy remains prohibited:
| Provision | Contents of policy |
| Para 5 of RBI (Commercial Banks – Credit Facilities) Directions, 2025 | Approval of credit policy covering areas such as Digital Lending including DLG, Project Finance, Housing Finance, Export Credit etc. |
| Para 14 of RBI (Commercial Banks – Transfer and Distribution of Credit Risk) Directions, 2025 | Approval of policy for transfer and acquisition of loan exposures |
Principle Based Approach
Along with the prescriptive list, the RBI proposes certain principles for delegation:
- The ultimate responsibility for the bank’s performance, conduct and control rests with the Board. It may, however, delegate certain matters to the Board Committees / Sub-Committees / Senior Management, along with reporting requirements as may be necessary.
- The Board shall clearly articulate the matters reserved for its approval or to be brought to its notice for information or reporting. The role and responsibilities of the Board under various statutes or regulations, may also be taken into account in determining such matters. However, the Board shall ensure that sufficient time is dedicated to strategy and risk governance.
- The Chairperson of the Board shall have the primary responsibility for setting the agenda of the meeting.
- The Board shall ensure that it receives sufficient information from the management to discharge its role effectively. It shall clearly define the nature, level of detail and frequency of information required from the management. The Board may rely on this information but 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 / Sub-Committees / Senior Management. The review shall also include the timelines for circulation of agenda items, adequacy of information captured in the agenda, time allotted for important matters, etc.
Further, the policies for which review is required, may be delegated to the board committees but the Board must approve material amendments (to be defined by the Board).
Future Actionables
Once the amendments are notified, private and public sector banks can expect the following actionables:
- Reviewing and revamping the delegation of the Board’s powers to board and management committees in light of the principles and prescriptive list.
- Documenting guidance in the form of an SOP on:
- Articulation of matters reserved for the approval of the Board or noting,
- Detailing the manner in which information to be received from the management etc
- Periodical review of matters to be placed before the Board or its committees etc.