Bank boards meet every few weeks to approve policies, note compliance reports and work through thick agenda papers. Discussions on strategy, risk and technology often get what time remains. The Reserve Bank of India wants to change this. From October 1, its revised governance directions will reduce the number of matters that banks must place before their boards. Directors will be expected to spend more time on strategy and risk oversight and less on routine approvals.
Boards must identify the matters reserved for their approval, review delegated powers and specify the information management should provide. The chairperson will have primary responsibility for setting the agenda. The directions apply to public and private sector banks, as well as small finance banks, payments banks and local area banks. RBI issued the amendments on July 14, 2026.
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RBI bank board rules shift responsibility
Indian banks need to move from procedural compliance to closer supervision of strategy and risk. Their traditional responsibilities for credit quality, liquidity and capital remain. They must now also supervise cybersecurity, cloud infrastructure, outsourced services and the use of artificial intelligence in lending and fraud detection.
Poor board attention can prove expensive. Before the global financial crisis, several international banks had elaborate governance systems but weak control over risk-taking. In India, the failures at Yes Bank, IL&FS and several cooperative banks showed how extensive reporting can coexist with poor oversight.
Directors need fewer papers and harder discussions.
The RBI directions require boards to decide what information they need and how frequently they need it. They must also review whether powers delegated to committees or management remain appropriate. This gives boards greater freedom but removes a familiar defence. If a major risk escapes attention, directors cannot readily claim that management failed to place the correct paper before them.
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Bank governance cannot run on checklists
The Basel Committee’s corporate governance principles leave boards responsible for strategy, financial soundness, risk management and senior management oversight. Day-to-day operations remain with management. Its guidelines also require boards to define the information they need and question whether it remains complete and timely.
The RBI has adopted much the same division. Bank boards retain authority over credit, investment, risk management, capital planning and other important policies. Routine matters may be delegated to committees or management. Delegation does not transfer the board’s responsibility for the bank.
That distinction is important. A board that approves every operational decision can still fail at governance. Its job is to examine the assumptions behind management decisions, test the bank’s risk appetite and intervene before losses become unmanageable.
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Bank boards face harder technology choices
The change comes as public sector banks have returned to profit and private banks are expanding their digital businesses. Fintech firms have altered customer acquisition and payments. Banks are using AI for credit decisions, fraud detection and customer service.
Boards must decide how far banks should use generative AI and what controls should govern the models. They must judge whether digital expansion is matched by spending on cybersecurity. They also have to examine credit exposure to sectors linked to India’s manufacturing push and decide how climate risks should enter lending decisions.
These questions cannot be disposed of through compliance notes. They require directors who understand technology, credit and regulation well enough to challenge management.
Boards will now specify the nature and frequency of the information they receive. This makes accountability easier to establish. A board that asks for the wrong information, or fails to act on it, owns the failure. Depositors are entitled to the same prudence whether a bank is owned by the government or private shareholders.
The change must show up in the boardroom. Directors need the expertise to examine technology investments and emerging financial risks. Chairpersons must permit disagreement. Management should expect its assumptions to be questioned.
The RBI’s approach also has relevance beyond banking. Many corporate boards spend much of their time reviewing past performance. Their more valuable task is to decide whether the company’s strategy can survive the risks ahead.