Sharper Board Oversight

A significant practical implication of this shift involves information flows. Control functions such as risk management, compliance and internal audit, have long been positioned as independent lines of business. The proposed amendments require Boards to go beyond formally receiving their reports and to understand not just what those reports say, but what patterns they reveal. This includes the nature and recurrence of control failures, the timeliness of remediation, and whether management responses are substantive or cosmetic. This is also likely to shape how such issues are viewed in supervisory inspections and audit observations.

In this context, the distinction between isolated lapses and systemic concerns assumes particular importance. A natural implication of this framework is that Boards must distinguish between a single compliance breach, which viewed in isolation may not warrant Board-level escalation, and patterns of repeat findings or delayed corrective action that point to something deeper. The proposed amendments reinforce the expectation that Boards review control functions on an ongoing basis and satisfy themselves that remediation of breaches is actually occurring.

The proposed amendments also reinforce the importance of preserving the practical independence of control functions. The amendments state that the Chief Risk Officer, Chief Compliance Officer and Head of Internal Audit must functionally report to the Board or the relevant Board Committee, meet the Board at least once a quarter without senior management present, and have their performance reviews conducted by the Board rather than executive management. The Board has to actively ensure that these officers have practical authority and organisational standing to escalate concerns without inhibition.

Governance Imperative

From a policy perspective, the proposed amendments reflect a continued push towards governance as a driver of institutional resilience, not merely a compliance requirement. In a sector where financial performance can mask underlying control concerns, robust governance serves as an early warning mechanism. By strengthening with board oversight and embedding accountability more firmly within the organisational framework, the RBI is signalling that risks should be identified and addressed before they become material failures.

For banks, the practical challenge could be considerable. What the RBI is now asking for is deeper: Boards that ask difficult questions, management teams that are willing to be questioned, individuals who are accountable given their role and institutions honest enough to solve problems. While this may have been the reality in practice, actual compliance on these counts is now imperative.

Ultimately, the significance of proposed amendments is in the underlying philosophy, which recognises that governance cannot be reduced to a checklist of requirements. It is, instead, a function of behaviour, including how Boards ask questions, how management responds, and how institutions internalise the discipline of oversight. In reinforcing this principle, the RBI has moved the needle on banking governance norms, which will now require practical demonstration.

This article was originally published in BW Business World on 11 July 2026 Co-written by: Veena Sivaramakrishnan, Partner, Co-Head, Banking & Finance Practice; Sneha Rao, Senior Associate. Click here for original article.

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