ENA Sectors 2026-04-09 15:48:26 <p><span style="font-size:14px"><strong>New Delhi, Apr 9 (KNN)</strong> The Reserve Bank of India (RBI) has issued draft Governance Amendment Directions, 2026, covering commercial banks, small finance banks, payments banks, and local area banks.</span></p> <p><span style="font-size:14px">The RBI has invited stakeholder and public feedback on these directions, aimed at improving bank board functioning and strengthening oversight of strategy and risk, by May 7, 2026.</span></p> <p><strong><span style="font-size:14px">Shift to Principle-Based Governance Framework</span></strong></p> <p><span style="font-size:14px">The central bank said it has undertaken a comprehensive review of existing instructions to help bank boards use their time more effectively. As part of the changes, the earlier framework based on seven broad themes has been replaced with a principle-based approach.</span></p> <p><span style="font-size:14px">This is intended to enable more focused and qualitative engagement by boards, particularly on strategic decision-making and risk governance.</span></p> <p><strong><span style="font-size:14px">Key Changes Proposed</span></strong></p> <p><span style="font-size:14px">Under the draft amendments, bank boards will be required to exercise direct oversight on key areas, including risk management systems, policies and strategies, exposure to related entities such as subsidiaries and investments, and compliance with corporate governance standards, including the functioning of board committees.</span></p> <p><span style="font-size:14px">Several existing provisions specifying matters to be placed before boards have been rationalised or removed to reduce duplication and improve clarity.</span></p> <p><strong><span style="font-size:14px">Greater Flexibility for Boards</span></strong></p> <p><span style="font-size:14px">The new framework allows boards to determine, based on guiding principles, which matters should be reserved for their approval, review, or information. </span></p> <p><span style="font-size:14px">While the board retains ultimate responsibility for a banks performance and conduct, it may delegate certain functions to committees or senior management with defined reporting mechanisms.</span></p> <p><span style="font-size:14px">Boards will also be required to clearly define what constitutes material amendments in policies, with only such changes requiring full board approval.</span></p> <p><span style="font-size:14px">The proposed changes are aimed at enhancing governance standards across banks, improving board accountability, and ensuring better oversight of risks in an evolving financial environment.</span></p> <p><em><strong><span style="font-size:14px">(KNN Bureau)</span></strong></em></p> 45735 https://knnindia.co.in/news/newsdetails/sectors/rbi-proposes-governance-reforms-to-enhance-bank-board-oversight 2026-04-09 15:48:26 knnindia.co.in