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The Reserve Bank of India amends governance directions for Small Finance Banks. Banks must include share-linked instruments as a component of variable pay. Banks must frame norms for these instruments within their compensation policy. Banks must fair value these instruments on the grant date using the Black-Scholes model. Banks must recognize the fair value as an expense starting from the approved accounting period. Banks must disclose remuneration for Whole Time Directors, Managing Directors, Chief Executive Officers, and Material Risk Takers annually in their Annual Financial Statements. These disclosures must follow the requirements in the specified Reserve Bank of India directions. These amendments apply to all Small Finance Banks starting April 1, 2027.
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RBI/DOR/2026-27/212 DOR.ACC.REC.No.189/29.67.001/2026-27 July 30, 2026
Reserve Bank of India (Small Finance Banks – Governance) Third Amendment Directions, 2026
Please refer to the Reserve Bank of India (Small Finance Banks – Governance) Directions, 2025 (hereinafter referred to as ‘the Directions’).
On a review, consequent to the issuance of the Reserve Bank of India (Small Finance Banks - Prudential Norms on Capital Adequacy) Fifth Amendment Directions, 2026, pertaining to Basel Pillar 3 disclosures, and in exercise of the powers conferred by the section 35A of the Banking Regulation Act, 1949 and all other laws enabling the Reserve Bank of India (hereinafter called the Reserve Bank) in this regard, the Reserve Bank being satisfied that it is necessary and expedient in the public interest so to do, hereby issues the Amendment Directions hereinafter specified.
These Directions shall be called the Reserve Bank of India (Small Finance Banks – Governance) Third Amendment Directions, 2026.
The Amendment Directions modify the Directions as under:
4(1) For Paragraph 55(3)(ii)(f), the following shall be substituted, namely:
“Share-linked Instruments: Such instruments shall be included as a component of variable pay. Norms for grant of share-linked instruments shall be framed by a bank in conformity with relevant statutory provisions and should form part of the bank’s compensation policy. The details of share-linked instruments granted shall also be disclosed in terms of the disclosure requirements stipulated in the Reserve Bank of India (Small Finance Banks: Financial Statements - Presentation and Disclosures) Directions, 2025 Reserve Bank of India (Small Finance Banks - Prudential Norms on Capital Adequacy) Directions, 2025. Share-linked instruments shall be fair valued on the date of grant by the bank using Black-Scholes model. The fair value thus arrived at shall be recognised as an expense beginning with the accounting period for which approval has been granted.”
4(2) For Paragraph 55(7), the following shall be substituted, namely:
“A bank shall make disclosure on remuneration of WTDs / MD&CEO / MRTs on an annual basis at the minimum, in their Annual Financial Statements as prescribed in Reserve Bank of India (Small Finance Banks: Financial Statements – Presentation and Disclosures) Directions, 2025 Reserve Bank of India (Small Finance Banks - Prudential Norms on Capital Adequacy) Directions, 2025, as amended from time to time.”
(Sunil T S Nair) Chief General Manager
