Master Directions

RBI/DOR/2025-26/249
DOR.GOV.REC.No.168/29.67.001/2025-26

November 28, 2025

Reserve Bank of India (Regional Rural Banks - Governance) Directions

In exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949, and all other provisions / laws enabling the Reserve Bank of India (‘RBI’) in this regard, RBI being satisfied that it is necessary and expedient in the public interest so to do, hereby issues the Directions hereinafter specified.

Chapter-I Preliminary

A. Short title and commencement

1. These Directions shall be called the Reserve Bank of India (Regional Rural Banks - Governance) Directions, 2025.

2. These Directions shall come into force with immediate effect.

B. Applicability

3. These Directions shall be applicable to Regional Rural Banks (hereinafter collectively referred to as ‘RRBs’ and individually as an ‘RRB’) as defined under Clause (ja) of Section 5 of the Banking Regulation Act, 1949, to the extent they are not inconsistent with the statutory provisions or instructions issued thereunder.

C. Definitions

4. In these directions, unless the context states otherwise, the terms herein shall bear the meanings assigned to them below:

(1) ‘Chairman’, in relation to an RRB, means the individual appointed or re-appointed under sub-section (1) of section 11 of The Regional Rural Banks Act, 1976, as the Chairman of that bank.

(2) ‘Commercial Banks’ means Public Sector Banks, Private Sector Banks, Regional Rural Banks and Foreign Banks.

(3) ‘Director’, in relation to an RRB, means a member of the Board of that RRB.

(4) ‘Sponsor Bank’ means the bank defined under Clause (g) of Section 2 of the Regional Rural Banks Act, 1976.

5. All other expressions, unless defined herein, shall have the same meaning as have been assigned to them under the Reserve Bank of India Act, 1934 or the Banking Regulation Act, 1949, the Regional Rural Banks Act, 1976, or any statutory modification or re-enactment thereto, or Glossary of Terms published by RBI or as used in common or commercial parlance, as the case may be.

Chapter-II Role of Nominee Directors and Non-Official Directors

6. The directors on the Board of an RRB shall ensure adherence to the following illustrative, but not exhaustive, list of DO'S and DONT'S:

(1) DO'S: A board member shall

(i) attend Board meetings regularly and effectively;

Explanation: Under Section 13(1)(b) of the RRBs Act 1976, the seat of a nominee director who remains absent without leave of the Board for more than 3 consecutive meetings shall become vacant.

(ii) study the Board papers, follow up and seek the assistance of the Chairman for eliciting any information;

(iii) ask the Chairman to furnish the board papers and follow up reports on a definite time schedule;

(iv) be involved in the follow up of the matter of formulation of general policy and ensure performance;

(v) be familiar with the objectives of the bank and policies laid down by GoI and RBI, and give constructive ideas for better management;

(vi) work as a team member without any prejudice;

(vii) try to give as much of their wisdom, guidance and knowledge as possible;

(viii) analyse the trends of economy and assist in discharge of the responsibility; and

(ix) disclose their interest whenever any advance for any proposal in which they are directly or indirectly interested,

(2) DONT'S: A board member shall not

(i) participate in meetings in which any advance for any proposal in which they are directly or indirectly interested is discussed;

(ii) send any instructions to any individual officer or give direction to individual officer in any matter. This may be routed through the Chairman of the RRB;

(iii) involve in any administrative matters;

(iv) interfere in the day to day functioning of the bank;

(v) insist on getting facilities from an individual branch manager;

(vi) involve in the day to day business of management's functions;

(vii) reveal any information of the bank to anyone; and

(viii) encourage an individual officer from approaching them in any matter.

Chapter-III Board Meeting Procedures

7. The quorum of a Board meeting shall be in accordance with the rule 8 of meetings of Board Rules notified by Government from time to time, with the modification that if there is no quorum in the adjourned meeting of the Board, the Chairman of RRB should give fresh notice for a fresh meeting.

8. While outsiders including officials of the Sponsor Bank who are not Directors are not allowed to attend meeting of the Board of an RRB to observe secrecy relating to the affairs of the RRB’s constituents, a senior official of the RRB may attend the Board meeting to provide secretarial assistance to the Chairman. They, however, cannot participate in the deliberations or discussions of the Board Meetings.

9. A model agenda for meetings of the Board of an RRB is given below:

Explanation: The list of items indicated in the above model agenda are indicative in nature and an RRB may make suitable changes as it deems fit keeping in view the best corporate governance standards.

10. The fees and allowances payable to the Non-Official Directors on the Board of an RRB shall be as as notified by GoI from time to time.

Chapter-IV Committees of the Board

A. Audit Committee of the Board

11. An RRB may set up an independent Audit Committee of the Board (ACB) for overseeing and providing direction to its internal audit, inspection machinery, Statutory (external) auditors and other executives. It may have direct, unfettered and independent access to management, internal audit, and statutory auditors, with whom it needs to communicate in confidence, independent of each other.

12. The ACB of an RRB may consist of three / four directors with one or more of such directors having experience in management, finance, accountancy, audit systems, etc.

Provided that,

1. in case no director/s are available in the Board to function in the ACB with adequate background in these areas, the Board may consider co-opting a Chartered Accountant or other professionally qualified person in the ACB.

2. the Chairman of the RRB may not be a member of the ACB;

3. the NABARD’s Nominee Director may be inducted into the ACB.

4. the normal convention of choosing the senior-most Director of the Board as the Chairman of the ACB may be adopted and this could be done by rotation annually, if considered necessary, due to the changes in the incumbencies of the Directors on the Board;

5. while the representative of Head Office of an RRB, who is associated with the conduct of the ACB meetings, may ideally be in a position to furnish clarifications required by the Committee in respect of issues pertaining to any of the Regions, the presence of concerned Regional Managers may be enlisted, if warranted, solely for the purpose of eliciting their views on critical issues pertaining to their respective Region.

13. The Board of Directors may ensure that Audit Committee members are independent, understand banking and financial matters and have the characteristics to serve as effective Audit Committee members. For this purpose, they may consider whether the members of the ACB:

1. possess a general understanding of the major operational, liquidity, credit, interest rates and reputational risks faced by the RRB;

2. have a broad awareness of the RRB’s statutory and other obligations as well as various business-related operations and their financial reporting;

3. have the ability to formulate and ask probing questions about the RRB's financial reporting process and to challenge management decisions if and when necessary;

4. possess the required competence and will to discuss with auditors and control the agenda with respect to competence and independence of auditors, internal control and diligence;

5. insist unrelentingly on legal compliance, accuracy in financial reporting, and truthfulness as the foremost objective of the RRB.

14. The ACB may meet at least four times annually, or more frequently as circumstances dictate. In order to obviate the problem arising out of lack of quorum in Audit Committee meetings, the RRB may arrange to fix these meetings by either pre-fixing or suffixing the same to their Board Meetings in normal circumstances. Conducting meetings of the ACB either in the forenoon or afternoon of the same day as the Board meetings may also aid in economising the expenditure.

15. The ACB may also meet, at least half-yearly, with management, the chief of the statutory audit / inspection team and the department of accounts in separate sessions to discuss any matters that the Committee or each of these groups believe should be discussed privately.

16. The ACB may oversee the internal controls and financial reporting process of the RRB as implemented by management, identification and quantification of various financial risks faced by the RRB and controls related to that process, and ensuring a fair and transparent financial reporting process. This includes oversight responsibility for financial reporting risks (including fraud risks) and controls related to those risks.

17. The ACB may assist the Board of Directors in fulfilling its oversight responsibilities by reviewing the RRB’s:

1. financial reports and other financial information provided by the RRB to any statutory body or the public;

2. internal controls regarding funds, accounting, legal compliance, ethics that management and the Board have established; and,

3. auditing, accounting and financial reporting processes.

18. For the above purpose, an ACB may perform, inter-alia, the following functions:

1. provide an open channel of communication among the external / departmental auditors, the internal audit department, senior management, and the Board of Directors;

2. serve as an effective and objective mechanism to monitor the RRB's financial reporting process and internal control system;

3. ensure expeditious closing of books of accounts as on March 31 every year with a view to prepare the Balance-Sheet and Profit & Loss Account within the time limit prescribed in the BR Act, 1949 and review the Annual Report with financial management and the accounts department prior to its release. The Chairman of the Audit Committee may represent the ACB for purposes of this review;

4. review the RRB’s annual financial statements and any reports or other financial information submitted to any statutory body, or the public, including any certification, report, opinion, or review rendered by the auditors; and ensure that management has a proper review system to ensure such dissemination satisfies legal requirements;

5. review any significant disagreement between the management and the accounts department or the internal audit department in connection with the preparation of the financial statements;

6. review the integrity of the RRB's financial reporting processes (especially, the correctness of NPAs and provisioning for impaired assets as per RBI norms) and monitor the "key risks and controls" thereof;

7. evaluate the accounts department's judgments about the quality and appropriateness of the RRB's accounting principles as applied in its financial reporting. The Committee may also ensure a periodic review of the RRB’s accounting policies, systems, and controls to enhance transparency in financial reporting and ensure adequacy of controls in addressing current and emerging risks faced by the RRB;

8. consider and approve, if appropriate, major changes to the RRB's auditing principles and practices as suggested by the accounts department, management, or the internal Audit Department / External Auditors / NABARD Inspection Team;

9. review with the accounts department, the internal audit department and management the extent to which changes or improvements in financial or accounting practices, as approved by the Audit Committee, have been implemented. This review may be conducted at an appropriate time subsequent to implementation of changes or improvements, as decided by the ACB.

10. recommend to the Board of Directors the selection of the Internal Auditor(s) considering their independence and effectiveness;

11. review the activities, organizational structure, and qualifications of the internal audit department; including a review of different types of inspections / audits (Internal Inspection, Internal Audit, Concurrent Audit, etc.) conducted within the RRB, their periodicity and scheduling, coverage and quality to ensure an effective internal audit function;

12. evaluate the competence and ensure independence of the internal and external auditors;

13. review the performance of the internal auditor / accounts officer;

14. periodically consult with the senior accountant / accounts officer, without the presence of management, about internal controls and the fullness and accuracy of the organization's financial statements.

15. establish regular and separate systems of reporting to the Audit Committee by the management, the accounts department and the internal auditors regarding any significant judgments made in management's preparation of the financial statements and the view of each as to the appropriateness of such judgments;

16. review and appraise the audits of the supervisor and RRB's external / departmental auditors, including Half-yearly Review report of the Statutory Auditors, and internal audit department. The Committee may specifically examine any omission on the part of internal inspecting officials or concurrent auditors to detect serious irregularities that come to light at a later stage;

17. review the regular internal reports to management prepared by the internal audit department and management's response thereto;

18. review and approve the compliances furnished by the RRB in respect of audit reports and inspection reports issued by NABARD, internal Inspection Department, concurrent auditors and statutory auditors;

19. following completion of the annual audit, review separately with the management, the accounts department and the internal audit department any significant difficulties encountered during the course of the audit, including any restrictions on the scope of work or access to required information.

20. review of adoption of measures for improvement in controls as suggested by internal/external auditors/NABARD’s inspection team, with specific emphasis on the follow-up action on Internal Inspection and Internal Audit Reports, particularly in respect of "unsatisfactory" branches and large branches. The Committee may also review the follow-up on concurrent audit observations. If measures are not adopted, compelling reasons may be in place. The ACB may also fix accountability for unsatisfactory compliance of inspection / audit reports, delay in compliance and non-rectification of deficiencies;

21. establish, review and update periodically a Code of Ethical Conduct and ensure that management has established a system to enforce, monitor and review this Code.

22. review, with the organization's counsel, any legal matter that could have a significant impact on the RRB's financial statements and legal compliance matters including corporate securities trading policies.

23. certification of physical possession of securities as reported to the RBI every quarter by Internal Auditors or Concurrent Auditors;

24. examine reasons for defaults in payment to the depositors and creditors whenever there are any cases of default in payments;

25. evaluate information security audit mechanism in the RRB with particular reference to Disaster Recovery System and Business Continuity Planning;

26. periodic review of the progress in reconciliation of entries in inter-bank and Inter-branch accounts and reconciliation of bank accounts;

27. review of frauds and action taken to recover the amount involved, to avoid recurrence of such frauds in future;

28. ensure adherence to KYC & PMLA guidelines issued by the RBI / NABARD and if any violations are observed, action taken thereon to avoid recurrence of the same;

29. review RRB’s compliance with statutory provisions with particular reference to Sections 24, 29, 31, 35A of Banking Regulation Act 1949, and Section 42(1), 42(6)(a)(i) & (ii) of RBI Act, 1934; and

30. any other activities consistent with these Directions, the instructions / guidelines issued by the RBI, NABARD or Government of India, from time to time, and the Banking Regulation Act, 1949 etc., as the Committee or the Board deems necessary or appropriate.

Provided that, the ACB may not be overloaded with other activities or else, the Committee may lose sight of its major objectives or perform its duties superficially. Further, the above list is illustrative and not exhaustive. The bank may firm up its detailed policy keeping in view these broad guidelines and frameworks.

19. While an RRB may, with the approval of its Board or the ACB, decide on the periodicity of review of various issues and accordingly, draw an annual Calendar of Reviews to be put up to the ACB, they may adopt the following periodicity in respect of the undernoted items:

(i) Quarterly

1. Inter-branch reconciliation,

2. unreconciled long outstanding entries in inter-branch and inter-bank accounts,

3. Performance of Audit / Inspection Department,

4. Inspection reports of poorly rated branches - Progress in rectification of deficiencies,

5. Position of house-keeping (i.e., balancing of books, clearing differences, etc.),

6. frauds

(ii) Half-yearly

1. compliance with the statutory audit / concurrent audit / Management Audit / NABARD Inspection reports,

2. omissions on the part of Internal Inspecting Officials to detect serious irregularities,

3. periodic review of the accounting policies / systems in the RRB with a view to ensuring greater transparency in the RRB's accounts and adequacy of accounting controls, and

4. Review of Loss Assets with balance of ₹1 lakh and above for more than two years and where legal action has not been initiated.

B. Risk Management Committee

20. Risk Management Committee (RMC) will be a Board level sub-committee including Chairman and heads of Credit, Market and Operational Risk Management Committees. Since the volume, size and nature of operations of RRBs are small as compared to the commercial banks, they may consider having a small Credit and Operational Risk Management Cell immediately, to begin with. Based on the quantum of investment portfolio, the Boards of the respective RRBs can decide to have a separate Market Risk Committee at a later stage.

21. The RMC will devise the policy and strategy for integrated risk management containing various risk exposures of the bank including the credit risk. For this purpose, RMC may effectively coordinate between Credit Risk Management Committee (CRMC), Asset Liability Management Committee (ALCO) and other risk committees of the bank, if any.

22. The Board of the RRB may, therefore, ensure that the independence of the RMC is not compromised at any cost. In the event of the Board not accepting any recommendation of this committee, systems may be put in place to spell out the rationale for such an action and may be properly documented. This document may be made available to the internal and external auditors for their scrutiny and comments.

23. The credit risk strategy and policies adopted by RMC may be effectively communicated throughout the organization.

24. An RRB may, at its discretion, constitute sub-committees and support committees to assist the RMC.

25. The RMC of an RRB may discuss the following as part of its meeting agenda:

1. identification of inherent business risks in various activities undertaken by the RRB;

2. risk measurement in terms of both uncertainty and its potential adverse impact on profitability;

3. evaluation of effectiveness of the control systems for monitoring the inherent risks of the business activities (control risk);

4. establish proper system of Disaster Recovery and Business Continuity Planning;

5. drawing up a risk-matrix for taking into account both the factors viz., inherent business risks and control risks;

6. fixing parameters for classification of high, medium and low risks;

7. risk measurement methodology by using previous internal audit reports and compliance;

8. suggest changes in loan policy and / or change prudential exposure norms;

9. oversee significant changes in management / key personnel, to manage 'operational risk';

10. scrutiny of Inspection report of NABARD and reports of external auditors and suggest suitable risk mitigation measures; and

11. risk focused internal audit.

26. The agendas suggested for each of the committees above are illustrative and not exhaustive, and an RRB may include additional items based on local conditions and emergent priorities.

Chapter-VI Repeal and other provisions

A. Repeal and saving

27. With the issue of these Directions, the existing Directions, instructions, and guidelines relating to governance as applicable to Regional Rural Banks, stand repealed, as communicated vide circular DOR.RRC.REC.302/33-01-010/2025-26 dated November 28, 2025. The Directions, instructions, and guidelines repealed prior to the issuance of these Directions shall continue to remain repealed.

28. Notwithstanding such repeal, any action taken or purported to have been taken, or initiated under the repealed Directions, instructions, or guidelines shall continue to be governed by the provisions thereof. All approvals or acknowledgments granted under these repealed lists shall be deemed as governed by these Directions. Further, the repeal of these directions, instructions, or guidelines shall not in any way prejudicially affect:

1. any right, obligation or liability acquired, accrued, or incurred thereunder;

2. any, penalty, forfeiture, or punishment incurred in respect of any contravention committed thereunder;

3. any investigation, legal proceeding, or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture, or punishment as aforesaid; and any such investigation, legal proceedings or remedy may be instituted, continued, or enforced and any such penalty, forfeiture or punishment may be imposed as if those directions, instructions, or guidelines had not been repealed.

B. Application of other laws not barred

29. The provisions of these Directions shall be in addition to, and not in derogation of the provisions of any other laws, rules, regulations, or directions, for the time being in force.

C. Interpretations

30. For the purpose of giving effect to the provisions of these Directions or in order to remove any difficulties in the application or interpretation of the provisions of these Directions, the RBI may, if it considers necessary, issue necessary clarifications in respect of any matter covered herein and the interpretation of any provision of these Directions given by the RBI shall be final and binding.

(Manoranjan Padhy)
Chief General Manager