Tuesday, 4 August 2026

Green-Channel: AIF Rollout Upon Document Acknowledgement’ (GARUDA) Mechanism for AIFs

Executive Summary

The Securities and Exchange Board of India (SEBI), through its circular dated 30 July 2026, has operationalised the Green-Channel: AIF Rollout Upon Document Acknowledgement (GARUDA) mechanism. The circular introduces a significantly streamlined framework for the filing of Placement Memoranda (PPMs) and the launch of Alternative Investment Fund (AIF) schemes, with the objective of reducing regulatory timelines, improving accountability and facilitating quicker fund launches. The framework follows the amendments to the SEBI (Alternative Investment Funds) Regulations, 2012, notified on 14 July 2026.

Background

Under the earlier framework, AIFs were generally required to file the Placement Memorandum (PPM) through a SEBI-registered Merchant Banker and await regulatory processing before launching schemes. This often resulted in delays in bringing investment products to market.

The GARUDA mechanism reflects SEBI's broader agenda of promoting Ease of Doing Business while maintaining robust disclosure standards through enhanced accountability of market intermediaries rather than extensive pre-launch regulatory scrutiny.

Key Features of the GARUDA Framework

1. Faster Launch of Regular AIF Schemes

Under the revised framework, Regular AIF schemes may now be launched after 10 working days from the filing of the Placement Memorandum with SEBI, unless SEBI advises otherwise. For the first scheme of an AIF, the launch can take place from the date of registration or after completion of the 10-working-day period, whichever is later.

2. Strengthened Role of Merchant Bankers

Merchant Bankers assume a significantly enhanced responsibility under the GARUDA mechanism. They are required to:

independently conduct due diligence on the Placement Memorandum;
certify the veracity, adequacy and completeness of disclosures;
confirm compliance with the AIF Regulations and applicable SEBI requirements; and
remain independent of the AIF, its Sponsor, Manager or Trustee.

Any deficiency or lapse in disclosures may expose the Merchant Banker and the Manager to regulatory action.

3. Simplified Framework for Accredited Investor Funds and Angel Funds

The circular grants substantial procedural relaxations to:

Accredited Investor (AI) Only Funds;
Large Value Funds (LVFs); and
Angel Funds.

These categories are exempt from the requirement of filing the Placement Memorandum through a Merchant Banker and incorporating SEBI's comments before launch. AI-only Funds and LVFs may launch schemes immediately upon filing the PPM with SEBI, while Angel Funds may circulate the PPM from the date of grant of registration. Instead, the CEO (or equivalent) and Compliance Officer of the Manager must furnish a prescribed undertaking confirming the accuracy and adequacy of disclosures.

4. Standardised Disclosure and Disclaimer Requirements

The circular mandates uniform disclaimer clauses in all Placement Memoranda, emphasising that:

SEBI does not approve or certify the PPM;
the Manager and Merchant Banker (or the Manager alone, in exempt cases) are responsible for the accuracy and completeness of disclosures; and
investors should not construe filing of the PPM as regulatory approval.

5. Naming Convention and PPM Amendments

To enhance transparency, new schemes must clearly indicate their category by including "AI only Fund/AIOF" or "LVF" in the scheme name, as applicable. Further, AI-only Funds, LVFs and Angel Funds may directly file subsequent changes to the PPM with SEBI without routing them through a Merchant Banker, subject to the prescribed undertaking.

Regulatory Significance

The GARUDA mechanism marks a shift from a predominantly approval-based model to a disclosure-based regulatory framework, placing greater reliance on the due diligence performed by Merchant Bankers and the governance responsibilities of AIF Managers.

The reforms are expected to:

shorten fund launch timelines;
reduce procedural bottlenecks;
improve operational efficiency;
strengthen accountability of intermediaries; and
support innovation and capital formation within India's alternative investment ecosystem.

Compliance Implications

Alternative Investment Funds, Managers and Merchant Bankers should:

update internal procedures for filing Placement Memoranda;
strengthen due diligence and disclosure review processes;
ensure independence of Merchant Bankers from the AIF structure;
revise PPM templates to incorporate the mandatory disclaimer clauses;
update compliance manuals to reflect the GARUDA mechanism; and
train legal, compliance and fund management teams on the revised operational framework.

Overall Assessment

The GARUDA mechanism represents one of the most significant procedural reforms for the Alternative Investment Fund industry in recent years. By substantially reducing the time required for launching new schemes while simultaneously enhancing the accountability of Merchant Bankers and AIF Managers, SEBI has sought to strike an effective balance between Ease of Doing Business and investor protection.

The framework demonstrates SEBI's transition towards a more principles-based, disclosure-driven regulatory approach, where responsibility for the quality and accuracy of disclosures rests primarily with regulated intermediaries. If implemented effectively, the GARUDA mechanism is expected to improve the speed, efficiency and competitiveness of India's AIF ecosystem while maintaining high standards of governance and market integrity.

How C-Suite and Board Roles Are Being Reshaped Around AI

How C-Suite and Board Roles Are Being Reshaped Around AI

A Detailed Note on the Emerging Governance Paradigm

Artificial Intelligence is no longer a futuristic concept confined to research laboratories or technology companies. It has become a transformative force reshaping every aspect of enterprise—from customer engagement and operations to strategic planning and corporate governance. While much attention has focused on AI's impact on products, services, and productivity, one of its most profound consequences is unfolding quietly in the boardroom and the executive suite. AI is redefining not only how companies operate but also how they are governed.

The emergence of generative AI, predictive analytics, autonomous decision-making systems, and intelligent automation has expanded the responsibilities of directors and executives alike. Increasingly, boards are expected not merely to approve technology investments but to ensure that AI is deployed responsibly, ethically, securely, and in a manner that aligns with the organisation's long-term strategic objectives.

1. AI Is No Longer Merely an IT Initiative

Historically, digital transformation was viewed primarily as the responsibility of the Chief Information Officer (CIO) or the technology department. Decisions relating to software implementation, cybersecurity, and infrastructure were largely operational matters.

Artificial Intelligence, however, is fundamentally different.

AI influences:

strategic decision-making,
customer relationships,
regulatory compliance,
product innovation,
financial forecasting,
recruitment,
supply chain management,
legal risk,
corporate reputation.

Consequently, AI has become an enterprise-wide strategic asset rather than a departmental tool.

This shift necessitates greater involvement from the Chief Executive Officer (CEO), Chief Financial Officer (CFO), Chief Risk Officer (CRO), General Counsel, Human Resources, and ultimately the Board of Directors.

2. The Board's Role Is Expanding Beyond Oversight

Traditionally, boards focused on three principal responsibilities:

financial stewardship,
executive supervision,
regulatory compliance.

In the AI era, directors must additionally consider questions such as:

Is AI aligned with corporate strategy?
What decisions should remain exclusively human?
Are AI systems transparent and explainable?
How is customer data being protected?
Does AI introduce legal or ethical risks?
Could algorithmic bias lead to discrimination claims?
How resilient are AI models against cyber threats?
What governance structures oversee AI deployment?

Boards are transitioning from passive reviewers to active stewards of technological transformation.

3. Every Executive Is Becoming an AI Executive

Artificial Intelligence is dissolving traditional organisational boundaries.

CEO

The Chief Executive Officer must determine:

how AI contributes to competitive advantage,
where automation creates value,
organisational readiness,
investment priorities.

The CEO becomes the principal architect of AI transformation.

CFO

Finance leaders increasingly employ AI for:

forecasting,
fraud detection,
financial planning,
treasury management,
capital allocation.

However, CFOs must also verify the integrity of AI-generated analyses and ensure regulatory compliance.

CIO

The CIO remains responsible for:

infrastructure,
systems integration,
cybersecurity,
technology architecture.

Yet the role is becoming significantly more strategic, focusing on enterprise-wide AI capabilities rather than merely maintaining IT systems.

Chief Human Resources Officer

Human Resources faces perhaps the greatest disruption.

Responsibilities now include:

workforce reskilling,
AI literacy,
organisational redesign,
ethical use of AI in recruitment,
employee trust,
change management.

Chief Legal Officer

Legal departments must address:

intellectual property,
copyright,
privacy,
AI regulation,
contractual liability,
algorithmic accountability.

The legal function is evolving into a strategic adviser on AI governance.

Chief Risk Officer

AI introduces novel categories of enterprise risk:

hallucinated outputs,
model drift,
adversarial attacks,
bias,
explainability,
concentration risk,
third-party AI dependencies.

Risk officers must develop entirely new frameworks for assessing and monitoring these challenges.

4. The Rise of the Chief AI Officer

Many organisations are creating a new executive position: the Chief AI Officer (CAIO).

Typical responsibilities include:

enterprise AI strategy,
governance frameworks,
model validation,
responsible AI,
AI investment prioritisation,
vendor management,
AI ethics.

Not every organisation will require a dedicated CAIO, but the emergence of this role reflects the strategic importance of AI across the enterprise.

5. AI Governance Is Becoming a Core Board Responsibility

Just as the financial scandals of the early 2000s elevated the importance of audit committees, AI is prompting boards to establish structured governance mechanisms.

Future boards are likely to require:

AI policies,
ethical principles,
model approval processes,
ongoing monitoring,
incident reporting,
accountability frameworks.

Some organisations are already establishing dedicated AI or Technology Committees to oversee these responsibilities.

6. Directors Must Develop AI Literacy

Board members are not expected to become software engineers or data scientists. However, they must acquire sufficient understanding to ask informed and challenging questions.

Key concepts include:

machine learning,
generative AI,
large language models,
algorithmic bias,
explainability,
data governance,
cybersecurity,
AI regulation.

Directors should approach AI with the same level of fluency expected in finance or risk management.

7. Ethical Considerations Are Becoming Central

Artificial Intelligence presents ethical dilemmas that extend beyond technical implementation.

Boards must consider:

Fairness

Are AI systems producing discriminatory outcomes?

Transparency

Can important decisions be explained to customers, regulators, and courts?

Privacy

Is customer information adequately protected?

Accountability

Who bears responsibility when AI systems make incorrect or harmful decisions?

Human Oversight

Which decisions should remain exclusively within human judgment?

Ethics is becoming an integral component of enterprise governance.

8. Cybersecurity and AI Are Increasingly Intertwined

AI can strengthen cybersecurity through improved threat detection and automated response.

Conversely, cybercriminals are leveraging AI to create:

sophisticated phishing attacks,
deepfakes,
malicious code,
social engineering campaigns.

Boards must ensure that cybersecurity strategies evolve in tandem with AI adoption.

9. Data Governance Becomes Mission-Critical

The effectiveness of AI depends on the quality, security, and governance of organisational data.

Boards must oversee policies addressing:

data ownership,
data quality,
consent,
retention,
cross-border transfers,
security,
regulatory compliance.

Poor data governance can undermine AI initiatives regardless of technological sophistication.

10. AI Will Transform Board Operations

Artificial Intelligence is poised to enhance board effectiveness by supporting, rather than replacing, directors.

Potential applications include:

summarising board papers,
highlighting emerging risks,
benchmarking competitors,
analysing regulatory developments,
identifying governance trends,
generating strategic scenarios.

Routine administrative work may increasingly be automated, allowing directors to devote more time to strategic deliberation.

11. New Competencies for Future Directors

Boards will increasingly seek directors with expertise in:

digital transformation,
AI,
cybersecurity,
behavioural science,
data governance,
sustainability,
global regulation,
innovation.

While financial and legal expertise will remain indispensable, technological competence is becoming equally important.

12. Implications for Company Secretaries

For governance professionals, AI presents both challenges and opportunities.

The modern Company Secretary is well positioned to become the custodian of AI governance by:

developing AI governance frameworks,
coordinating board education,
monitoring evolving regulations,
overseeing AI-related disclosures,
integrating AI into board processes,
ensuring compliance with ethical standards,
facilitating informed board discussions on AI risks and opportunities.

The role extends beyond statutory compliance to strategic governance leadership.

13. Challenges Boards Must Address

Despite AI's potential, boards face significant governance challenges:

Balancing innovation with prudent risk management.
Avoiding over-reliance on AI-generated recommendations.
Ensuring transparency and explainability in critical decisions.
Addressing the rapid evolution of AI regulations across jurisdictions.
Preventing bias and discrimination embedded within AI systems.
Managing increasing cybersecurity threats amplified by AI.
Recruiting directors with relevant technological expertise.
Maintaining public trust in AI-enabled decision-making.

These issues require boards to adopt a proactive and adaptive governance approach.

Looking Ahead

Artificial Intelligence is ushering in a new era of corporate governance. The boardroom is evolving from a forum focused primarily on historical performance and financial oversight to one that must also navigate technological disruption, ethical considerations, and strategic transformation.

Successful organisations will be those whose boards cultivate AI literacy, establish robust governance frameworks, encourage interdisciplinary expertise, and maintain meaningful human oversight over AI-driven decisions. The objective is not merely to deploy AI efficiently but to ensure that it serves the organisation's mission, protects stakeholder interests, and creates sustainable long-term value.

For company secretaries, directors, and senior executives, AI represents more than another compliance issue—it is a defining governance challenge of the coming decade. Those who embrace continuous learning and thoughtful oversight will be best equipped to lead organisations through this period of unprecedented technological change.

NB: Article curated from HBR with the help of AI

Monday, 3 August 2026

IRDAI's Revised Investment Regulations

Introduction

The Insurance Regulatory and Development Authority of India (IRDAI), at its Authority meeting held on 31 July 2026, approved a comprehensive revision to the investment framework applicable to insurers. The reforms are intended to modernise the investment regime, enhance operational flexibility, improve liquidity management and facilitate greater participation by insurers in financing India's economic growth, while continuing to safeguard policyholders' interests. The detailed regulations are expected to be notified separately after the Authority's approval.

Background

The insurance sector is one of India's largest institutional investors, managing substantial long-term funds on behalf of policyholders. Historically, the investment regulations prescribed conservative investment avenues with significant restrictions on investments in unlisted entities, infrastructure projects and liquidity management instruments.

The revised framework seeks to balance prudential investment norms with the need to provide insurers greater flexibility in deploying long-term capital efficiently. The reforms also align with the Government's broader objective of improving the Ease of Doing Business and strengthening long-term financing for infrastructure and private enterprises.

Key Reforms Approved

1. Investment in Private Limited Companies

One of the most significant reforms is the permission granted to insurers to invest in private limited companies, subject to the prudential conditions prescribed by IRDAI.

Previously, investment opportunities in privately held companies were significantly restricted. The revised framework broadens the investment universe available to insurers, enabling them to participate in the growth of high-quality unlisted businesses while diversifying their investment portfolios.

2. Relaxation for Infrastructure Investments through SPVs

The Authority has eased investment norms relating to infrastructure projects, permitting insurers to invest through Special Purpose Vehicles (SPVs) under prescribed conditions.

Infrastructure projects are frequently implemented through SPV structures. The revised regulations are expected to facilitate greater participation by insurers in financing roads, ports, renewable energy, urban infrastructure and other long-term development projects.

3. Enhanced Liquidity Management

The revised framework allows insurers to undertake:

Repo transactions;
Reverse repo transactions; and
Government securities lending transactions.

These measures provide insurers with improved tools for liquidity management and more efficient deployment of surplus funds without materially increasing investment risk.

4. Greater Portfolio Diversification

By expanding eligible investment avenues, the revised regulations enable insurers to diversify their portfolios beyond traditional listed securities and government instruments.

A broader investment universe is expected to improve risk-adjusted returns while reducing concentration risk, subject to IRDAI's exposure limits and prudential safeguards.

Regulatory Significance

The revised investment regulations represent one of the most important reforms in IRDAI's investment framework in recent years.

The reforms seek to achieve multiple regulatory objectives:

increase investment flexibility for insurers;
improve liquidity management;
facilitate long-term infrastructure financing;
encourage investment in emerging businesses;
promote efficient asset-liability management; and
strengthen the insurance sector's contribution to India's economic development.

Impact on Stakeholders

Insurance Companies

Insurers will benefit from:

wider investment opportunities;
improved portfolio diversification;
enhanced liquidity management;
greater flexibility in treasury operations; and
the ability to optimise long-term investment strategies.

Infrastructure Sector

The relaxation relating to SPVs is expected to improve the availability of institutional capital for infrastructure development, supporting the Government's infrastructure financing agenda.

Private Enterprises

Permission to invest in private limited companies is likely to improve access to long-term institutional capital for high-quality unlisted businesses and growth-stage enterprises.

Policyholders

Although the reforms expand investment flexibility, insurers remain subject to IRDAI's prudential investment framework, ensuring that policyholder funds continue to be managed in accordance with sound risk management principles.

Compliance Implications

Once the detailed regulations are notified, insurers should:

review and update Board-approved investment policies;
revise investment limits and internal risk management frameworks;
strengthen due diligence procedures for investments in private companies;
update treasury policies to incorporate repo and securities lending transactions;
reassess infrastructure investment strategies involving SPVs; and
ensure compliance with the revised exposure limits, valuation norms and governance requirements that may be prescribed in the final regulations.

Overall Assessment

The revised Investment Regulations mark a significant shift in IRDAI's regulatory approach—from a highly prescriptive investment regime towards a more principles-based framework that provides insurers with greater operational flexibility while retaining prudential oversight.

By permitting investments in private limited companies, facilitating infrastructure investments through SPVs and introducing modern liquidity management tools, IRDAI has recognised the evolving role of insurers as long-term institutional investors. These reforms are expected to improve capital allocation efficiency, deepen India's financial markets and support infrastructure development without compromising policyholder protection.

Overall, the reforms reflect IRDAI's commitment to creating a more agile, efficient and globally aligned insurance investment ecosystem, while reinforcing the sector's contribution to sustainable economic growth.

Sunday, 2 August 2026

The Future of Company Boards

The Future of Company Boards: From Compliance to Strategic Stewardship

For decades, corporate boards were often caricatured as ceremonial bodies—meeting quarterly to review financial statements, approve management proposals, and fulfil statutory obligations. Their responsibilities were largely defined by oversight, fiduciary duty, and compliance. Today, however, the very nature of corporate governance is undergoing a profound transformation. The boardroom is no longer a sanctuary of retrospective scrutiny; it is becoming a crucible of strategic foresight.

The future of company boards will be shaped by five powerful forces: technological disruption, stakeholder capitalism, geopolitical uncertainty, sustainability, and the increasing complexity of corporate risk. Collectively, these forces are redefining what it means to be an effective director.

1. The Board's Expanding Mandate

Traditionally, boards focused on three principal responsibilities:

Protecting shareholder interests.
Appointing and supervising senior management.
Ensuring financial integrity.

While these remain fundamental, modern boards are increasingly expected to oversee issues that scarcely featured on board agendas twenty years ago:

Artificial Intelligence
Cybersecurity
Climate risk
Data privacy
Human capital
Corporate culture
Digital transformation
Supply-chain resilience
Geopolitical exposure

In effect, directors must now understand not merely balance sheets but ecosystems.

2. AI Will Change Governance

Artificial Intelligence represents perhaps the most disruptive force boards have encountered since the internet.

Boards must ask questions such as:

How is AI being deployed?
Who validates AI-generated decisions?
What are the ethical implications?
Are customer data adequately protected?
Could algorithmic bias expose the company to litigation?

Future boards will likely establish dedicated AI Oversight Committees, much as Audit Committees emerged following financial scandals.

Directors themselves will increasingly use AI to:

analyse board papers,
identify emerging risks,
simulate strategic scenarios,
benchmark competitors,
monitor regulatory developments.

The boardroom itself may become AI-assisted rather than AI-driven.

3. Cybersecurity Becomes a Board-Level Issue

Cybersecurity has migrated from the IT department to the boardroom.

Major cyber incidents can erase billions in market value within hours.

Consequently, boards must now understand:

ransomware
supply-chain attacks
cloud vulnerabilities
identity management
incident response
cyber insurance

Future directors need not become cybersecurity engineers, but they must possess sufficient literacy to ask intelligent questions.

4. ESG Is Becoming Risk Management

Environmental, Social and Governance (ESG) discussions have evolved.

Initially viewed as reputation management, ESG increasingly represents financial risk management.

Climate change affects:

insurance costs
infrastructure
supply chains
water availability
energy prices

Social factors influence:

employee retention
productivity
brand loyalty
litigation risk

Governance failures continue to destroy corporate value faster than almost any other factor.

Future boards will integrate ESG into enterprise risk management rather than treating it as a standalone initiative.

5. Diversity Beyond Demographics

Board diversity discussions are becoming more sophisticated.

Earlier emphasis centred on:

gender
ethnicity
nationality

While these remain important, future boards increasingly seek diversity of expertise.

For example:

A board overseeing an AI-driven pharmaceutical company may include:

an AI scientist
a cybersecurity specialist
a behavioural economist
a former regulator
a climate expert
an experienced entrepreneur

Cognitive diversity is emerging as a competitive advantage.

6. Human Capital Is Becoming Strategic

The pandemic fundamentally altered perceptions of employees.

Boards now recognise talent as a strategic asset rather than merely an operating expense.

Future board discussions increasingly cover:

succession planning
leadership development
employee engagement
hybrid work
organisational culture
mental wellbeing
workforce reskilling

Many investors now evaluate companies based upon their ability to attract and retain talent.

7. Directors Must Become Continuous Learners

Historically, directors often relied upon decades of executive experience.

That model is becoming obsolete.

Today's directors must continually update their knowledge regarding:

AI
climate science
geopolitics
cybersecurity
digital business models
behavioural economics
emerging regulation

Board education is becoming an ongoing obligation rather than an annual seminar.

8. Geopolitical Risk Enters the Boardroom

Globalisation once emphasised efficiency.

Today's environment prioritises resilience.

Boards must now consider:

trade wars
sanctions
export controls
supply-chain concentration
political instability
currency volatility

Strategic decisions increasingly involve geopolitical analysis alongside financial modelling.

9. The Rise of Stakeholder Capitalism

Shareholders remain central.

However, successful companies increasingly balance the interests of:

employees
customers
suppliers
regulators
local communities
governments

Boards are expected to demonstrate long-term stewardship rather than merely maximising quarterly earnings.

10. Digital Boardrooms

Technology is changing how boards operate.

Increasingly, directors receive:

interactive dashboards
real-time risk monitoring
AI-generated summaries
predictive analytics
collaborative digital board portals

Routine reporting may become automated, allowing meetings to focus more on strategic discussion.

11. Committee Structures Are Evolving

Traditional committees include:

Audit
Nomination
Remuneration
Risk

Future boards may establish additional committees covering:

Artificial Intelligence
Technology
Sustainability
Innovation
Cybersecurity
Digital Transformation

Committee structures will become more specialised as corporate complexity increases.

12. Greater Accountability

Institutional investors increasingly scrutinise directors individually rather than treating the board as a collective entity.

Directors are now assessed on:

meeting attendance
preparedness
expertise
independence
effectiveness
diversity
contribution to strategic discussions

Board evaluations are becoming more rigorous and data-driven.

13. The Skills Matrix of Tomorrow

An ideal future board may include expertise across:

Competency	Importance
Finance	Essential
Law & Governance	Essential
Digital Technology	Essential
AI	High
Cybersecurity	High
Sustainability	High
Human Resources	High
International Markets	High
Risk Management	Essential
Public Policy	Valuable

Rather than recruiting retired CEOs alone, boards are increasingly seeking specialists who can address emerging strategic challenges.

14. Implications for Company Secretaries

The role of the Company Secretary is also evolving significantly.

Future Company Secretaries are likely to:

coordinate AI governance frameworks,
oversee ESG reporting,
manage board evaluations,
monitor regulatory developments across jurisdictions,
advise on cyber governance,
facilitate continuous director education,
enhance board information systems,
support stakeholder engagement.

The Company Secretary is becoming a strategic governance adviser rather than solely a compliance professional.

Challenges Ahead

Despite these developments, boards face several enduring challenges:

Information overload, as directors receive ever-increasing volumes of data.
The risk of becoming overly dependent on management or AI-generated insights.
Recruiting directors with expertise in rapidly evolving fields.
Balancing innovation with prudent risk management.
Navigating a complex and often fragmented global regulatory landscape.
Maintaining sufficient time for strategic reflection amid expanding oversight responsibilities.

Addressing these issues will require disciplined governance processes and a willingness to rethink long-established board practices.

Looking Ahead

The boardroom of the future will bear little resemblance to that of the past. Directors will need to combine traditional fiduciary responsibilities with fluency in technology, sustainability, geopolitics, and organisational culture. Effective governance will depend less on reviewing historical performance and more on anticipating future risks and opportunities.

Boards that embrace continuous learning, encourage diverse perspectives, leverage technology judiciously, and maintain an unwavering commitment to ethical leadership will be better equipped to guide their organisations through an increasingly uncertain world. In this new era, the most valuable boards will not merely supervise management—they will help shape resilient, innovative, and sustainable enterprises capable of creating enduring value for shareholders and society alike.

RBI (Income Recognition, Asset Classification and Provisioning) Second Amendment Directions, 2026

Executive Summary

The Reserve Bank of India (RBI) has issued the Reserve Bank of India (Commercial Banks – Income Recognition, Asset Classification and Provisioning) Second Amendment Directions, 2026, dated 16 July 2026, to align the income recognition framework with the newly introduced prudential regime governing Specified Non-Financial Assets (SNFAs) under the RBI's Resolution of Stressed Assets framework. The amendment prescribes the accounting treatment for income and expenses relating to SNFAs and will come into force from 1 October 2026.

Background

The amendment is a consequential measure following the issuance of the Reserve Bank of India (Commercial Banks – Resolution of Stressed Assets) Third Amendment Directions, 2026. Since banks may acquire immovable assets in satisfaction of stressed loan exposures, RBI has introduced specific income recognition norms to ensure that such assets are accounted for prudently and that unrealised income is not recognised prematurely.

Key Amendments

1. Income Recognition on Acquisition of SNFAs

A new provision, Paragraph 139C, has been inserted in Chapter V (Income Recognition) of the Directions. It provides that:

Accrued but unrealised interest and/or charges relating to the extinguished loan exposure shall not be recognised as income upon acquisition of an SNFA.
Where such unrealised income has already been recognised in respect of an SNFA outstanding as on 30 September 2026, banks are required to reverse the unrealised portion through the Profit and Loss Account on or before 30 September 2027.

This reinforces the principle that banks should recognise income only when it is actually realised, thereby preventing the overstatement of earnings.

2. Recognition of Income and Expenses from SNFAs

A new Paragraph 139D prescribes the accounting treatment after acquisition of an SNFA:

Income received from an SNFA shall be recognised as "non-interest / other income" in the financial year in which it is realised.
Expenses incurred for the upkeep or maintenance of an SNFA shall be recognised in the income statement in the financial year in which they are incurred.

This ensures consistency in financial reporting and reflects the non-lending nature of income generated from such assets.

Regulatory Significance

The amendment complements RBI's newly introduced SNFA framework by establishing a clear and conservative accounting treatment for assets acquired during the resolution of stressed exposures. It prevents recognition of unrealised interest after extinguishment of the original loan and requires banks to account for income only upon actual receipt.

The Directions are aligned with prudent accounting principles and are expected to improve the transparency and reliability of banks' financial statements.

Compliance Implications

Banks should undertake the following actions before the Directions become effective on 1 October 2026:

Review all existing SNFAs and identify any accrued but unrealised interest already recognised.
Reverse unrealised income relating to legacy SNFAs by 30 September 2027.
Update accounting policies to classify income from SNFAs as non-interest / other income.
Ensure that maintenance and upkeep costs of SNFAs are appropriately recognised as expenses.
Modify accounting systems and internal controls to comply with the revised income recognition requirements.
Train finance, accounting and compliance teams on the amended framework.

Overall Assessment

The Second Amendment Directions, 2026 strengthen RBI's prudential and accounting framework for stressed asset resolution by ensuring that banks adopt a realisation-based approach to income recognition for Specified Non-Financial Assets. The amendments reinforce conservative accounting practices, enhance transparency in financial reporting and prevent premature recognition of income arising from extinguished loan exposures.

Read together with the Resolution of Stressed Assets Third Amendment Directions, 2026, these amendments create a comprehensive regulatory framework governing the acquisition, valuation, reporting and accounting treatment of SNFAs, thereby promoting sound financial discipline and improved governance in the banking sector.

Saturday, 1 August 2026

50 Rules to Keep Client Happy

**Book Review: 50 Rules to Keep a Client Happy by Fred Poppe**

There is a peculiar temptation in modern business literature to mistake complexity for profundity. Shelves groan under the weight of books promising revolutionary customer engagement strategies, disruptive relationship frameworks, and algorithmic approaches to client retention. Fred Poppe's 50 Rules to Keep a Client Happy takes the diametrically opposite approach. It does not aspire to reinvent client service; instead, it reminds us that excellence in professional relationships is usually the cumulative result of consistently doing the simple things well.

Originally published in 1988, the book is disarmingly modest in both size and ambition. At barely a hundred pages, it can comfortably be read in a single sitting. Yet its brevity should not be mistaken for superficiality. Poppe distils decades of professional wisdom into fifty concise, practical rules that continue to resonate despite the dramatic transformation of the business landscape over the past four decades.

At the heart of the book lies a deceptively simple proposition: clients rarely remain loyal because a professional is the cheapest or even the most technically brilliant. They remain loyal because they feel valued, respected, informed, and confident that their interests are being treated with the same seriousness as one's own. Every rule in the book circles back to this central philosophy.

One of the book's greatest strengths is its relentless emphasis on communication. Poppe repeatedly underscores that clients dislike uncertainty far more than they dislike bad news. Returning phone calls promptly, acknowledging correspondence, keeping clients informed about delays, setting realistic expectations rather than optimistic ones, and never allowing silence to create anxiety are themes that recur throughout the book. In an era dominated by email, messaging platforms, and video conferences, these lessons have arguably become even more relevant than when they were first written.

Equally valuable is the author's insistence on honesty. Rather than encouraging professionals to overpromise in pursuit of new business, Poppe advocates transparency about capabilities, timelines, and limitations. He understands that trust, once damaged, is extraordinarily difficult to rebuild. The book reminds readers that credibility is earned not through flawless performance but through dependable integrity.

Another admirable aspect is its focus on responsiveness. Many professionals underestimate how much clients appreciate even small acknowledgements—a quick confirmation that a document has been received, a brief update on ongoing work, or a proactive call before a deadline slips. Poppe recognises that responsiveness is not merely administrative efficiency; it is a powerful signal that the client matters.

The rules also extend beyond communication into matters of professionalism and attitude. Courtesy, punctuality, preparation, attention to detail, reliability, and taking ownership of mistakes are treated not as optional virtues but as essential habits. None of these ideas is revolutionary, but together they create a blueprint for sustained professional success.

What makes the book particularly effective is its universal applicability. Although written from the perspective of client service, its principles are equally relevant to lawyers, accountants, architects, company secretaries, consultants, financial advisers, doctors, freelancers, entrepreneurs, and indeed anyone whose profession depends upon trust. Technology may have transformed how professionals interact with clients, but it has not altered the underlying psychology of relationships.

The book's age does occasionally reveal itself. Certain examples and references belong unmistakably to the business culture of the late 1980s, long before cloud computing, artificial intelligence, social media, remote work, or instant messaging became commonplace. Readers expecting contemporary case studies or discussions of digital client experience may find these omissions noticeable. However, these are limitations of context rather than substance. Human expectations—respect, reliability, transparency, and competence—have changed remarkably little.

One could also argue that the book occasionally oversimplifies situations where commercial realities are more nuanced. Difficult clients, conflicting priorities, fee negotiations, and organisational politics sometimes require judgements that cannot be neatly captured in a single rule. Nevertheless, Poppe never claims to provide an exhaustive manual; his objective is to establish enduring principles rather than prescribe universal solutions.

Perhaps the greatest compliment one can pay the book is that nearly every chapter prompts self-reflection. Experienced professionals are likely to recognise habits they already practise, while simultaneously identifying areas where complacency may have crept in. Newer professionals, meanwhile, will discover that technical competence alone rarely guarantees success. Long-term careers are built as much upon relationships as upon expertise.

In today's environment, where businesses invest heavily in customer relationship management software, predictive analytics, automation, and artificial intelligence, Poppe's work serves as a timely reminder that no technology can substitute for genuine professionalism. Software can schedule follow-ups and generate reports, but it cannot replace empathy, honesty, accountability, or sincere concern for a client's success.

Ultimately, 50 Rules to Keep a Client Happy succeeds because it understands a timeless truth: clients are not simply purchasing products or services; they are investing their trust. Professionals who consistently honour that trust rarely need elaborate marketing strategies, for satisfied clients become enthusiastic advocates.

Nearly four decades after its publication, Fred Poppe's slim volume remains an elegant and practical guide to the fundamentals of client service. It may not contain fashionable jargon or groundbreaking theories, but it possesses something far more valuable—wisdom that endures.

Rating: ★★★★☆ (4.5/5)

A concise yet profoundly practical classic that deserves a place on the bookshelf of every professional whose success depends upon building lasting client relationships. It reminds us that while industries evolve, the principles of trust, respect, reliability, and exceptional service remain gloriously timeless.

Friday, 31 July 2026

Simplification and standardisation of the framework for transmission of securities

Executive Summary

The Securities and Exchange Board of India (SEBI) has issued a circular titled "Ease of Doing Investment and Ease of Doing Business – Simplification and Standardisation of the Framework for Transmission of Securities", with the objective of streamlining the process for transmission of securities held by deceased investors. The circular seeks to reduce procedural complexities, standardise documentation requirements across market intermediaries and Registrars to an Issue and Share Transfer Agents (RTAs), and facilitate faster settlement of transmission requests while maintaining appropriate safeguards against fraud.

The revised framework reflects SEBI's continued emphasis on investor protection, operational efficiency and ease of doing business in the securities market.

Background

Transmission of securities has traditionally involved varying documentation requirements across listed companies, depositories and RTAs, often resulting in delays and inconvenience for legal heirs and nominees. To address these challenges, SEBI has rationalised and standardised the transmission process by prescribing uniform procedures and documentation requirements applicable across intermediaries.

The circular forms part of SEBI's broader initiative to improve investor services and simplify post-investment processes.

Key Highlights

1. Standardisation of Documentation

The circular prescribes a uniform framework for processing transmission requests, thereby eliminating inconsistencies in documentation requirements among different intermediaries. This is expected to reduce ambiguity and expedite the processing of claims.

2. Simplified Transmission Process

SEBI has simplified the procedural requirements applicable to nominees and legal heirs by clearly specifying the documents required in different situations, including:

transmission where a valid nomination exists;
transmission in the absence of nomination;
cases involving multiple legal heirs; and
situations requiring succession certificates, probate or letters of administration.

The objective is to ensure consistency and minimise avoidable procedural hurdles.

3. Higher Monetary Thresholds

The circular revises the monetary thresholds up to which transmission requests may be processed on the basis of simplified documentation without insisting upon succession certificates or similar legal documents. This significantly reduces the compliance burden for families dealing with relatively smaller investments.

4. Uniform Practices Across Market Participants

Depositories, listed companies, RTAs and other intermediaries are required to adopt harmonised procedures for processing transmission requests. This promotes consistency, reduces interpretation-related disputes and enhances investor confidence.

5. Improved Timelines

The framework encourages faster disposal of transmission requests through standardised operating procedures and clearly defined documentation requirements, thereby reducing delays experienced by claimants.

Regulatory Significance

The circular represents an important investor-centric reform by balancing procedural simplification with necessary legal safeguards.

The key regulatory objectives include:

improving ease of doing investment;
enhancing investor experience;
reducing documentation-related disputes;
ensuring uniform implementation across intermediaries;
facilitating timely transmission of securities to rightful claimants; and
strengthening confidence in India's securities market infrastructure.

Compliance Implications

The circular has important implications for:

Listed companies
Registrars and Share Transfer Agents (RTAs)
Depositories
Depository Participants (DPs)
Stock Exchanges
Legal heirs and nominees of investors

Market participants should:

review and update their internal transmission policies and standard operating procedures;
revise application forms, checklists and customer communication materials;
train operational teams handling transmission requests;
ensure systems reflect the revised monetary limits and documentation requirements; and
monitor compliance with the standardised framework across all investor service channels.

Impact on Investors

For investors and their families, the revised framework is expected to:

simplify the transmission process;
reduce paperwork and legal formalities;
shorten processing timelines;
minimise operational inconsistencies; and
facilitate quicker access to inherited securities.

The reforms are particularly beneficial for nominees and legal heirs who often face practical challenges in obtaining succession-related legal documents.

Overall Assessment

The circular is a significant step towards modernising India's investor service framework. By simplifying and standardising the transmission process, SEBI has addressed a long-standing operational issue affecting investors and their legal successors.

The revised framework demonstrates SEBI's commitment to ease of doing investment, ease of doing business, and investor protection. Standardised documentation, higher monetary thresholds for simplified transmission and harmonised practices across market intermediaries are expected to reduce administrative delays while preserving the integrity of the transmission process.

Overall, the circular represents a pragmatic regulatory reform that is likely to improve operational efficiency, strengthen investor confidence and contribute to a more seamless post-investment experience in the Indian securities market.