What changed
RBI issued a comprehensive governance framework specifically for payments banks under Section 35A of the Banking Regulation Act, 1949. The directions cover board composition, director fit-and-proper criteria, appointment of MD&CEO, part-time chairman, whole-time directors, and key roles like CRO, CFO, and CTO. It also introduces detailed provisions on remuneration, malus, clawback, and retention periods for material risk takers and control function staff.
What it means for you
Payments banks must now comply with stricter governance standards similar to universal banks, enhancing board oversight and risk management. The exemption for non-scheduled payments banks on CRO, CFO, and CTO appointments provides some relief, but they still need to meet other governance requirements. Banks will need to review and update their board appointment processes, remuneration policies, and committee structures to align with these directions.
What you must do
- Review and update board appointment due diligence processes to include fit-and-proper criteria as per Annex I format.
- Ensure board committees (Nomination and Remuneration, Audit) are constituted as per Chapter VI.
- Align remuneration policies with malus, clawback, and retention period requirements for material risk takers and control function staff.
- Non-scheduled payments banks: confirm exemption applicability for CRO, CFO, and CTO appointments and plan compliance for other chapters.
- Submit required regulatory approvals and reporting as per Chapter X within stipulated timelines.
Who it affects
All payments banks (scheduled and non-scheduled), Board of directors and independent directors of payments banks, MD&CEO, whole-time directors, and part-time chairmen, Chief Risk Officer, Chief Financial Officer, Chief Technical Officer, Material risk takers and control function staff
Are non-scheduled payments banks fully exempt from these directions?
No, they are exempt only from Chapter VII (Appointment of CRO) and Chapter VIII (Appointment of CFO and CTO). All other chapters, including board constitution, director fit-and-proper criteria, committees, and remuneration norms, apply fully.
What is the effective date of these directions?
The directions came into force with immediate effect from November 28, 2025, the date of issuance.
Do these directions replace any existing RBI guidelines for payments banks?
Yes, Chapter XI provides for repeal of previous directions on payments bank governance. Banks should refer to the full text for specific repealed circulars.