Reserve Bank of India (Commercial Banks - Compliance Function) Directions, 2026

1. Why this function exists

Compliance is part of a bank's assurance system, beside internal audit and risk management.

1. In force at once

These rules came into force on the day they were issued.

2. Who is covered

These rules bind every commercial bank; small finance, payments and local area banks have their own versions.

3. What compliance risk is

Compliance risk is the punishment, money loss, or lost trust a bank faces for breaking the rules.

1. Policy reviewed yearly

The board must have a compliance policy in place and review it at least once a year.

2. Audit kept separate

Compliance and internal audit must be kept separate functions.

3. The chief executive's duty

The bank's chief must make sure the function exists, stays independent, and the policy is followed.

4. Action on breaches

When rule breaks are found, management must fix them and punish where due.

5. A yearly risk map

Management must identify and assess the bank's main compliance risks at least once a year.

6. Failures reported promptly

Any material compliance failure must be reported promptly to the board or its audit committee.

7. The board owns it

The board answers for the compliance function and for the bank's compliance risk.

8. A quarterly review

The board or its audit committee reviews the compliance function every quarter, with a detailed annual review.

1. Never audit duty

Compliance staff may never be assigned audit or inspection duty; that is a conflict of interest.

2. A head office department

A compliance department must be set up at the bank's head office, headed by the chief compliance officer.

3. Codes count too

The function covers the law, RBI's rules, and the codes of industry bodies.

4. Every unit has one

Every office and branch names its own compliance official, who reports to the chief compliance officer.

5. The central role

The head office department identifies the compliance risk in each business line, product and process.

BankPulse example. Two departments disagree about how much compliance risk a new process carries. The compliance function plays the central role in identifying the level of compliance risk in the organisation. It is not one voice among several.

6. Circulars vetted first

The function vets the bank's own circulars against the regulations before they go out to operating units.

1. The age cap

The officer must not be over 55 years of age at appointment, with a continuity exception.

BankPulse example. A candidate aged 54 may be appointed. A candidate aged 56 may not be, because the age at appointment must not be more than 55.

2. Fifteen years behind them

The officer needs 15 years of overall experience, at least five of them in control functions.

BankPulse example. An officer needs at least 15 years in banking or financial services. At least five of those 15 years must be in audit, finance, compliance, legal or risk. So 20 years in banking with only three years in those functions is not enough.

3. Three years minimum

The appointment is for a fixed tenure of not less than three years.

4. Tell RBI first

RBI must be told in advance before the officer is appointed, transferred early, or removed.

5. An independent chief

The function is headed by a chief compliance officer, who may be recruited from outside the bank.

6. Fit and proper first

The officer is chosen through a defined selection process with a fit and proper evaluation; the board decides.

7. A clean record

No vigilance case or adverse RBI observation may be pending against the candidate.

8. Hard to remove

Moving or removing the officer early needs rare grounds and the board's clear prior approval.

9. A senior rank

The officer holds senior rank, not below two levels from the chief executive.

10. A private quarterly meeting

If the officer reports to the chief, the audit committee meets the officer alone every quarter.

11. No business targets

The officer reports to no business vertical and carries no business targets.

12. One hat only

No dual hatting: the officer takes no role that conflicts with compliance, and sits on committees only as an adviser.

13. Reach everything

The officer may speak to any staff member and open any record needed for compliance work.

1. One dashboard

The bank needs workflow tools that track compliance and give management one dashboard view of the whole bank.

1. What it replaces

Earlier compliance function circulars for this class of bank stand repealed by these Directions.