Tuesday, 11 August 2026

Amendment to SEBI (Issue and Listing of Municipal Debt Securities) Regulations, 2015

SEBI circular dated 11 August 2026, concerning amendments and operational changes relating to the SEBI (Issue and Listing of Municipal Debt Securities) Regulations, 2015 (ILMDS Regulations)

1. Executive Summary

The circular introduces important operational changes for municipal debt securities, particularly in relation to:

Face value and trading lot of privately placed municipal debt securities.
A two-step escrow mechanism for pooled finance vehicles/SPVs established under the Pooled Finance Development Fund Scheme.
Additional forms of credit enhancement available to pooled finance vehicles.
Relaxation of timelines for financial-result submissions by municipalities.
Immediate applicability of the circular.

The overall regulatory approach appears aimed at making municipal debt issuance more practical while strengthening mechanisms for investor protection and repayment security.

2. Face Value of Municipal Debt Securities

For municipal debt securities issued through private placement, the face value of each security may now be ₹1,00,000 or ₹10,000, as considered appropriate. However, securities having a face value of ₹10,000 must have:

a fixed maturity; and
no structured obligations.

Further, where such municipal debt securities are listed and traded on a stock exchange, the trading lot must always equal the face value of the security. These requirements apply specifically to private placements and do not apply to public issues.

Regulatory significance

This is a significant operational relaxation because the availability of a ₹10,000 denomination can potentially broaden accessibility to municipal debt securities in the private-placement market.

However, SEBI has attached safeguards to the lower denomination. The restriction against structured obligations and the requirement of fixed maturity reduce the complexity and potential risk associated with smaller-denomination instruments.

Compliance implication: Issuers undertaking private placements should ensure that the face value, maturity structure and trading lot are correctly reflected in the offer document/placement memorandum and listing documentation.

3. Two-Step Escrow Mechanism for Pooled Finance Vehicles

A major change concerns municipal debt securities issued through a pooled finance vehicle/SPV established under the Pooled Finance Development Fund Scheme of the Government of India.

The constituent municipalities must create and comply with the prescribed accounts. In addition, the SPV/pooled finance vehicle must maintain:

an Interest Payment Account, and
a Sinking Fund Account.

Funds are to be transferred from the corresponding accounts maintained by the constituent municipalities to the accounts maintained by the SPV, in accordance with the agreement between the SPV and the constituent municipalities.

A particularly important requirement is that the SPV must throughout the tenure of the municipal debt securities maintain an amount equivalent to one year's interest obligation in the Interest Payment Account.

Risk-management significance

This provision materially strengthens the payment-security architecture for municipal bonds issued through pooled structures.

The requirement for maintaining one year's interest obligation provides a dedicated liquidity buffer, thereby reducing the possibility that temporary cash-flow mismatches at the constituent-municipality level could immediately translate into an interest-payment default.

From an investor-protection perspective, this is one of the more consequential provisions of the circular.

4. Permitted Credit Enhancement Mechanisms

SEBI has expressly identified several forms of credit enhancement that may be used by an SPV/pooled finance vehicle to improve its credit rating and provide greater investor protection.

These include:

additional cash collateral;
programme equity contributed by the State Government;
access to State Finance Commission devolutions to Urban Local Bodies;
full or partial credit guarantees from a highly rated Development Finance Institution or multilateral institution; and
other appropriate credit-enhancement structures.

Analysis

The provision is important because municipal borrowing capacity is closely linked to perceived credit quality. By expressly recognising multiple forms of credit enhancement, SEBI is facilitating structures through which the underlying credit risk can potentially be reduced.

The involvement of State Government support, Finance Commission-related flows and institutional guarantees could improve investor confidence and potentially facilitate better pricing and wider participation in municipal debt offerings.

At the same time, the effectiveness of such enhancement will depend upon the legal enforceability, adequacy, liquidity and reliability of the underlying support mechanism. Merely having a credit-enhancement provision does not, by itself, eliminate underlying municipal credit risk.

5. Relaxation of Financial-Result Submission Timelines

The circular provides a significant compliance relaxation for municipalities.

Previously, the applicable timelines were:

Financial information	Earlier timeline
Half-yearly unaudited financial results	Within 45 days of the end of the first half-year
Annual audited financial results	Within 60 days from the end of the financial year

SEBI has now extended these periods to:

Financial information	Revised timeline
Half-yearly unaudited financial results	Within 60 days of the end of the first half-year
Annual audited financial results	Within 90 days from the end of the financial year, along with the audit report

The results must continue to be submitted as soon as they are available, notwithstanding the outer time limits.

Rationale

SEBI specifically recognises the practical difficulties faced by municipalities in:

collecting financial data;
coordinating between departments; and
meeting disclosure requirements within the earlier timelines.

The extension therefore appears to be a practical compliance relaxation rather than a dilution of the disclosure requirement itself.

6. Impact on Municipalities

For municipalities with listed debt securities, the circular should reduce immediate compliance pressure, particularly concerning financial-result preparation and reporting.

The extended 60-day and 90-day periods provide additional time for:

consolidation of departmental information;
reconciliation of financial data;
completion of audit procedures;
internal approvals; and
preparation of exchange disclosures.

However, municipalities should not interpret the extended deadline as justification for delaying preparation. The requirement remains to submit the results as soon as they are available.

7. Impact on Investors

From an investor perspective, the circular has both positive and potentially mixed implications.

Positive aspects include:

stronger escrow arrangements for pooled finance structures;
maintenance of a one-year interest buffer;
availability of additional credit-enhancement mechanisms;
greater clarity regarding denomination and trading lots.

The principal concern is the extension of financial-reporting timelines. Investors will potentially receive annual audited financial information later than under the earlier framework.

Nevertheless, SEBI appears to have balanced this concern against the practical difficulties municipalities face in producing timely and reliable financial information.

8. Key Compliance Action Points

Municipalities, pooled finance vehicles, SPVs, merchant bankers and other intermediaries should consider the following actions:

For municipalities:

Review existing municipal debt documentation in light of the revised requirements.
Reassess internal systems for maintaining interest-payment and sinking-fund accounts.
Establish an internal calendar based on the revised 60-day half-yearly and 90-day annual reporting deadlines.
Ensure financial results are submitted immediately once available rather than automatically waiting until the outer deadline.
Review agreements with pooled finance vehicles/SPVs for consistency with the revised escrow mechanism.

For pooled finance vehicles/SPVs:

Establish and maintain the prescribed Interest Payment Account and Sinking Fund Account.
Ensure appropriate fund-transfer mechanisms are incorporated into agreements with constituent municipalities.
Monitor maintenance of the one-year interest obligation throughout the tenure of the securities.
Evaluate suitable credit-enhancement arrangements.
Document the legal and operational enforceability of any State Government, institutional or other credit support.

For merchant bankers and professional advisers:

The revised provisions should be incorporated into transaction structuring, due diligence, placement documentation, escrow arrangements and compliance checklists.

9. Overall Assessment

The circular represents a pragmatic recalibration of the regulatory framework for municipal debt securities. It does not merely relax compliance requirements; it simultaneously introduces mechanisms intended to improve payment security and facilitate the development of the municipal bond market.

The most significant measures are the ₹10,000 denomination option for specified privately placed securities, the two-step escrow mechanism with a one-year interest reserve, and the recognition of multiple credit-enhancement mechanisms.

The extension of financial-result timelines from 45 to 60 days for half-yearly results and from 60 to 90 days for annual audited results is a meaningful operational relaxation for municipalities.

Overall, the circular appears designed to reduce operational barriers to municipal borrowing while strengthening the structural safeguards around repayment and investor protection. Since the provisions are stated to apply with immediate effect, affected municipalities, issuers, SPVs, stock exchanges, depositories and merchant bankers should review their existing processes and documentation without delay.

Monday, 10 August 2026

RBI (Commercial Banks – Financial Statements: Presentation and Disclosures) Eighth Amendment Directions, 2026

1. Executive Summary

The Reserve Bank of India has issued the Reserve Bank of India (Commercial Banks – Financial Statements: Presentation and Disclosures) Eighth Amendment Directions, 2026, vide Notification No. DOR.ACC.REC.No.184/21.04.018/2026-27 dated July 30, 2026.

The amendment primarily rationalises certain disclosure requirements applicable to commercial banks. Specifically, it deletes the provisions relating to disclosures on the Liquidity Coverage Ratio (LCR), Net Stable Funding Ratio (NSFR), and remuneration contained in Paragraph 10 of the RBI's Commercial Banks – Financial Statements: Presentation and Disclosures Directions, 2025.

The amendments have been issued following the RBI's review consequent to the Reserve Bank of India (Commercial Banks – Prudential Norms on Capital Adequacy) Seventh Amendment Directions, 2026, particularly in relation to Basel Pillar 3 disclosures.

Importantly, the amendments will come into force with effect from April 1, 2027, giving banks time to align their financial-statement disclosure processes and reporting frameworks.

2. Background and Regulatory Context

The notification makes it clear that the amendment is not an entirely standalone change. It arises from the RBI's review of the existing 2025 Directions, following the issuance of the Seventh Amendment Directions, 2026 relating to prudential norms on capital adequacy and Basel Pillar 3 disclosures.

This indicates a broader effort by the RBI to rationalise the manner in which regulatory information is disclosed by commercial banks, particularly where disclosure requirements may overlap with or have been affected by the revised Basel Pillar 3 disclosure framework.

The notification is issued under Section 35A of the Banking Regulation Act, 1949, together with other enabling statutory provisions.

3. Key Amendments

The amendment makes three substantive deletions from Paragraph 10 of the 2025 Directions:

Existing provision	Subject	Amendment
Paragraph 10(2)(ii)	Liquidity Coverage Ratio (LCR) disclosures	Deleted
Paragraph 10(2)(iii)	Net Stable Funding Ratio (NSFR) disclosures	Deleted
Paragraph 10(13)	Remuneration disclosures	Deleted

These deletions are expressly specified in Paragraph 4 of the amendment notification.

A. LCR disclosures

Paragraph 10(2)(ii), dealing with disclosures relating to the Liquidity Coverage Ratio, has been deleted.

The immediate regulatory consequence, based on this notification, is that the particular LCR disclosure requirement contained in the 2025 Financial Statements Directions will no longer apply from the effective date.

However, the notification does not state that the underlying LCR regulatory requirement itself has been abolished. The amendment specifically concerns the disclosure provision in the Financial Statements Directions. Therefore, it would be inappropriate to interpret this notification, by itself, as eliminating the prudential requirement to maintain an appropriate LCR.

B. NSFR disclosures

Similarly, Paragraph 10(2)(iii), relating to Net Stable Funding Ratio disclosures, has been deleted.

As with LCR, the notification specifically removes the identified financial-statement disclosure provision. It does not, on its face, state that the underlying prudential framework governing NSFR has been withdrawn.

C. Remuneration disclosures

Paragraph 10(13), relating to remuneration disclosures, has also been deleted.

Consequently, banks will need to review their financial-statement disclosure checklists and reporting templates to identify disclosures that were previously being made specifically pursuant to this paragraph.

Again, the notification should not automatically be interpreted as abolishing the broader regulatory framework concerning remuneration of bank personnel. It only expressly deletes the identified disclosure provision from the relevant Financial Statements Directions.

4. Effective Date

A particularly important aspect from a compliance perspective is that the amendments will not take effect immediately.

The notification specifically provides that the amendments shall come into force from:

April 1, 2027.

Accordingly, banks should continue to comply with the existing disclosure requirements until the amendments become effective, unless another RBI notification separately provides otherwise.

This creates an implementation window during which banks can review their financial reporting, regulatory disclosure and internal compliance frameworks.

5. Impact on Commercial Banks

Financial reporting

Banks should review their financial statement disclosure templates and remove, from the appropriate reporting period onwards, the disclosures that are being specifically deleted by this amendment.

Particular attention should be given to:

LCR disclosure tables;
NSFR disclosure tables;
remuneration-related disclosures prescribed under Paragraph 10(13);
financial statement preparation checklists;
regulatory reporting matrices; and
internal disclosure-control procedures.

Regulatory compliance

The compliance function should distinguish between:

disclosures prescribed under the 2025 Financial Statements Directions, which are specifically amended by this notification; and
prudential or Basel-related requirements contained in other RBI directions, which may continue independently.

This distinction is particularly important for LCR and NSFR because deletion of a disclosure provision should not automatically be construed as withdrawal of the underlying prudential requirement.

Audit and assurance

Banks should also communicate the amendment to their financial reporting, internal audit and statutory audit teams so that disclosure checklists are appropriately updated for the relevant financial year.

6. Basel Pillar 3 Implications

The notification expressly states that the amendment follows the issuance of the Seventh Amendment Directions, 2026 concerning Prudential Norms on Capital Adequacy, particularly with regard to Basel Pillar 3 disclosures.

This is significant because Pillar 3 is fundamentally concerned with market discipline through regulatory disclosures.

The present amendment therefore appears to be part of a broader regulatory realignment of disclosure requirements, rather than simply an isolated deletion of three disclosure items.

For banks, this means that the regulatory reporting framework should be reviewed holistically to determine where the relevant information is now required to be disclosed and under which RBI framework.

7. Compliance Action Points

Commercial banks should consider the following actions before April 1, 2027:

Immediate review

Identify all disclosures currently made pursuant to Paragraph 10(2)(ii), 10(2)(iii) and 10(13).
Map these disclosures against other applicable RBI/Basel disclosure requirements.
Determine whether any substantially similar disclosure continues to be required under another regulatory framework.

Documentation

Update financial statement disclosure checklists.
Amend accounting and regulatory reporting manuals.
Update internal compliance matrices and standard operating procedures.
Review templates used by the finance and regulatory reporting functions.

Governance

Inform the CFO/finance function, compliance department, risk function and internal audit.
Place the regulatory change before the appropriate management/regulatory compliance committee, where applicable.
Ensure that changes are incorporated into the financial reporting control framework.

Implementation

Establish April 1, 2027 as the implementation date in the compliance calendar.
Ensure that the first financial reporting period affected by the amendment is appropriately identified.
Retain an audit trail demonstrating implementation of the regulatory change.

8. Key Regulatory Interpretation

A crucial point for management is that this notification is narrowly drafted.

It states that specified paragraphs dealing with disclosures "shall stand deleted."

Therefore, the safest interpretation is:

The notification removes the specified disclosure requirements from the RBI's Commercial Banks – Financial Statements framework; it does not, by itself, establish that the underlying LCR, NSFR or remuneration-related regulatory requirements have ceased to exist.

Banks should therefore avoid treating the amendment as a relaxation of the underlying prudential or governance requirements without examining the relevant standalone RBI directions.

9. Overall Assessment

The amendment represents a targeted rationalisation of financial-statement disclosure requirements for commercial banks, undertaken in the context of the RBI's evolving Basel Pillar 3 disclosure framework.

Its principal effect is the deletion of three specified disclosure requirements relating to LCR, NSFR and remuneration.

From a compliance perspective, the amendment is relatively straightforward but requires careful implementation because removal of a disclosure requirement should not be confused with removal of the underlying regulatory obligation.

The April 1, 2027 effective date provides banks with sufficient lead time to conduct a disclosure-gap analysis, revise reporting templates and update internal compliance and financial reporting controls.

Management takeaway

Commercial banks should continue following the existing disclosure framework until March 31, 2027, and use the intervening period to identify, map and remove the three specified disclosures from their financial-statement reporting framework from April 1, 2027, while separately verifying whether equivalent disclosures continue to be required under the revised Basel Pillar 3 or other applicable RBI directions.

Sunday, 9 August 2026

Extension of timeline for enrolment with PaRRVA

SEBI circular dated August 3, 2026, concerning the extension of the deadline for enrolment with the Past Risk and Return Verification Agency (PaRRVA) by Investment Advisers (IAs) and Research Analysts (RAs).

Professional Analysis

1. Subject matter

SEBI has extended the deadline for enrolment with PaRRVA from August 3, 2026 to September 3, 2026. The extension is specifically relevant to IAs and RAs who intend to communicate certified past performance data to existing or prospective clients.

2. Background

SEBI's earlier circular dated October 30, 2025 had provided that IAs and RAs wishing to communicate certified past performance data would be required to enrol with PaRRVA within three months of its operationalisation. Failure to enrol within the prescribed period would result in their inability to communicate such certified past performance data thereafter.

PaRRVA was subsequently operationalised with effect from May 4, 2026. Accordingly, SEBI's April 29, 2026 circular prescribed August 3, 2026 as the enrolment deadline.

3. Extension granted

SEBI has now extended the enrolment deadline by one month, up to September 3, 2026. The stated rationale is to facilitate a "smooth and seamless implementation of the framework", following representations received from industry participants and PaRRVA.

Compliance implication

The practical implication is important:

IAs/RAs intending to communicate certified past performance data should ensure that they complete their PaRRVA enrolment on or before September 3, 2026.
The extension does not appear to dispense with the PaRRVA enrolment requirement; it merely provides additional time for compliance.
The underlying restriction remains relevant: an IA/RA that is required to enrol but does not do so would not be permitted to communicate certified past performance data after the applicable deadline.
Accordingly, entities covered by the circular should treat September 3, 2026 as the revised compliance cut-off date.

Regulatory significance

The circular reinforces SEBI's continuing focus on ensuring that past performance information communicated by investment advisers and research analysts is subject to an appropriate verification framework. This is particularly significant because historical performance figures can materially influence an investor's assessment of an adviser or analyst.

The circular derives its authority from Section 11(1) of the SEBI Act, 1992, read with the relevant provisions of the SEBI (Intermediaries) Regulations, 2008, SEBI (Investment Advisers) Regulations, 2013 and SEBI (Research Analysts) Regulations, 2014.

Suggested compliance action

For an IA/RA compliance checklist, I would recommend recording the following:

Particular	Compliance position
Regulatory authority	SEBI
Circular date	3 August 2026
Applicable entities	Registered Investment Advisers and Registered Research Analysts
Subject	Enrolment with PaRRVA
PaRRVA operationalisation	4 May 2026
Earlier deadline	3 August 2026
Revised deadline	3 September 2026
Trigger	Communication of certified past performance data
Recommended action	Complete PaRRVA enrolment by revised deadline

Overall assessment: This is a deadline-extension circular rather than a substantive modification of the PaRRVA framework. The key compliance takeaway for IAs and RAs is therefore straightforward: the additional one-month window should be utilised to complete PaRRVA enrolment, particularly where the entity intends to communicate certified past performance data to clients or prospective clients.

Saturday, 8 August 2026

A Better India, A Better World

N. R. Narayana Murthy’s A Better India, A Better World is an unusual book in that it is neither quite an autobiography nor an economic treatise, neither a corporate manual nor a conventional political commentary. Published in 2009 by Penguin Books India, it is essentially a compilation of Murthy’s speeches and lectures, bringing together his reflections on leadership, values, entrepreneurship, education, governance, corruption, globalisation, economic reform and India’s social challenges.

What gives the book its coherence is Murthy’s conviction that economic progress, by itself, cannot constitute national progress. Prosperity must be accompanied by integrity, competent institutions, responsible leadership and an enlargement of opportunity. His central proposition is disarmingly simple: a better India can be built only when its citizens and institutions become better.

The central argument: growth with values

Murthy approaches India’s problems less as a politician or ideologue than as an entrepreneur who has spent a lifetime observing institutions from close quarters. His experience at Infosys informs much of his thinking, particularly his faith in professionalism, transparency, meritocracy and ethical conduct.

The book repeatedly returns to two foundational requirements: values and leadership. Murthy argues that neither economic reform nor technological advancement can achieve their full potential if institutions are weakened by corruption, incompetence and the absence of accountability.

This is perhaps the book’s most enduring insight. Development is not merely a matter of constructing roads, increasing GDP or attracting foreign investment. It is also about creating an environment in which an ordinary citizen can expect institutions to function fairly and predictably.

Murthy's faith in values is not presented as sentimental idealism. He treats ethical behaviour as a practical prerequisite for sustainable prosperity. In his worldview, honesty is not merely a moral ornament; it is an economic asset.

From the Infosys experience to the Indian experience

Naturally, Infosys occupies an important place in Murthy’s argument. The company becomes something of a case study in how Indian enterprise can compete globally while adhering to professional and ethical standards.

Murthy's account is particularly significant because Infosys emerged during the transformative period following India’s economic liberalisation of 1991. The book examines what India learnt from those reforms and what remained unfinished. Its contents range from economic reforms and globalisation to corruption, urban planning, education and corporate governance.

Yet Murthy does not suggest that the Infosys model can simply be transplanted onto the nation. Rather, he uses the company's experience to illustrate broader principles: merit should matter more than connections; institutions should be transparent; employees should be treated with dignity; wealth creation should be legitimate; and success carries obligations towards society.

There is an implicit social contract here: business must create wealth and employment, government must create an enabling environment, and citizens must exercise responsibility.

Entrepreneurship as an instrument of social change

One of the book's strongest themes is Murthy’s belief that entrepreneurship is not synonymous with greed or accumulation.

For him, the entrepreneur performs a socially useful function by converting ideas into enterprises, enterprises into employment and employment into purchasing power and dignity. A contemporary review of the book captured this aspect of his philosophy particularly well: Murthy argues that poverty can ultimately be addressed through the creation of jobs that provide people with meaningful disposable incomes.

This is important because Murthy's solution to poverty is not principally charitable. Philanthropy has its place, but sustainable poverty reduction requires economic participation.

In that respect, the book is unapologetically pro-growth—but it is growth with a conscience. Wealth creation is not condemned; rather, the manner in which wealth is created becomes morally consequential.

The great Indian paradox

Perhaps the most compelling section of the book is its confrontation with India's contradictions.

Murthy writes about an India capable of producing world-class technology companies, highly skilled professionals and globally competitive entrepreneurs, while millions of its citizens continue to struggle with hunger, inadequate education, disease and poverty. The book's original premise explicitly focuses on this enormous developmental divide.

That paradox remains central to the book’s emotional force.

India, Murthy seems to argue, cannot congratulate itself merely because one part of the country has entered the global knowledge economy. A genuinely successful nation must ensure that the benefits of development travel beyond metropolitan enclaves and privileged classes.

His India is therefore not simply a richer India. It is an India in which prosperity becomes more widely distributed and opportunity becomes less dependent on accident of birth.

Education: learning rather than merely qualifying

Murthy places considerable emphasis on education, but his idea of education goes beyond degrees and examinations.

He regards education as the foundation of India's ability to compete in a rapidly changing world. Knowledge must generate curiosity, adaptability and the capacity for continuous learning. This is especially relevant to his larger argument because economic transformation creates opportunities only for those capable of acquiring the skills demanded by that transformation.

The emphasis is therefore not merely on producing graduates but on producing people capable of learning, questioning and adapting.

This part of the book also reveals Murthy’s characteristic pragmatism. Education is simultaneously a means of personal liberation, economic advancement and national development.

Corruption and governance

Murthy is at his most forthright when discussing corruption.

His diagnosis is that corruption is not simply a problem of dishonest individuals. It becomes entrenched when institutions are weak, procedures are opaque and accountability is inadequate. The solution, consequently, cannot depend entirely upon appeals to personal morality.

Better systems are required.

Transparent processes, professional administration, accountability and effective institutions must make corruption more difficult and honest conduct easier. This institutional emphasis is one of the book's more sophisticated aspects.

Murthy understands something that moral exhortations often overlook: good people operating inside badly designed systems can still produce bad outcomes.

The importance of leadership

Leadership, for Murthy, is fundamentally about responsibility rather than privilege.

A leader must possess vision, but vision without execution is merely rhetoric. He must have the courage to make difficult decisions, the humility to learn from others and the integrity to place institutional interests above personal gain.

This philosophy naturally reflects Murthy's own public image, but the book is strongest when it moves beyond autobiography and asks what kind of leadership India requires.

The answer is not necessarily charismatic leadership. It is ethical, competent and accountable leadership.

That distinction is crucial.

Globalisation and learning from the West

Murthy's discussion of globalisation is pragmatic rather than defensive. He sees no virtue in rejecting foreign ideas simply because they originate elsewhere. India should learn from countries that have developed successful institutions, systems of governance, educational models and business practices.

But learning does not mean imitation.

The underlying message is that India should be confident enough to borrow what works while retaining what is valuable in its own intellectual and cultural inheritance.

This makes the book considerably less nationalistic than its title might suggest. Murthy's conception of a better India is not an India withdrawing from the world; it is an India capable of participating in the world on equal terms.

What makes the book particularly appealing

The greatest strength of A Better India, A Better World is its clarity.

Murthy does not write like an academic economist. His prose is straightforward, measured and accessible. This makes complicated subjects—economic reforms, corporate governance, corruption and globalisation—approachable even for readers without specialised knowledge.

The book is also fundamentally optimistic.

Murthy does not deny India's problems, but neither does he surrender to cynicism. His underlying belief is that India's difficulties are formidable but not insurmountable. The country possesses human capital, entrepreneurial energy, democratic institutions and a young population; what it requires is the institutional and ethical framework to convert those assets into inclusive progress.

That optimism can occasionally feel almost too neat.

Where the book falls short

The book's greatest weakness is also a consequence of its origin.

Because it is a compilation of speeches delivered over several years, it can feel repetitive and episodic rather than like a carefully constructed, continuous argument. The book contains 38 speeches covering a remarkably broad range of subjects, from values and education to corporate governance, entrepreneurship and globalisation.

Some arguments therefore recur in slightly different forms.

More importantly, certain prescriptions can seem overly dependent on the assumption that good values, competent leadership and market-oriented growth will naturally produce desirable outcomes.

The real world is considerably messier.

Economic growth can coexist with inequality. Markets can create employment while also producing insecurity. Corporate success does not automatically translate into social justice. Government intervention can be necessary even when government itself is inefficient. And corruption is sometimes embedded in political and economic structures far more deeply than institutional reform alone can resolve.

Murthy's framework is consequently more persuasive as a moral and managerial philosophy than as a comprehensive blueprint for public policy.

There is also a distinctly early-2000s optimism about technology, globalisation and India's economic trajectory. Since the book was published in 2009, some of its immediate economic and technological assumptions inevitably belong to a different India.

Yet the book's larger questions have aged considerably better than some of its specific observations.

Why the book still matters

What makes A Better India, A Better World worth revisiting is that its fundamental question has not become obsolete:

What does it actually mean for India to become a better country?

Is it merely higher GDP? More billionaires? Bigger corporations? Better infrastructure? Technological sophistication?

Murthy's answer is that these are means rather than ends.

A better India must ultimately be judged by the quality of life available to its citizens, the integrity of its institutions, the accessibility of opportunity and the ethical standards expected of those who wield power—whether political, bureaucratic or corporate.

That is why the title is significant. Murthy deliberately connects the national and the global. A better India, he argues, does not exist in isolation from the rest of humanity. An India that combines prosperity with social responsibility, technological capability with ethical conduct, and ambition with compassion can contribute meaningfully to a better world.

Final assessment

A Better India, A Better World is not a book of radical ideas. Its prescriptions—education, entrepreneurship, good governance, institutional accountability, ethical leadership and economic opportunity—are hardly revolutionary. Its achievement lies elsewhere: in bringing these disparate strands together into a coherent philosophy of nation-building.

Murthy writes with the confidence of a technocrat, the optimism of an entrepreneur and the moral seriousness of a citizen who believes that success creates obligations.

At times, the book can seem overly earnest, repetitive and insufficiently attentive to the complexity of structural inequality. But it would be unfair to judge it solely as an economic or political treatise. Its real ambition is more philosophical: to persuade Indians, particularly the young, that the country's future is not something to be passively inherited but something to be actively constructed.

Its most valuable lesson is perhaps that development without values is merely accumulation, and prosperity without inclusion is merely privilege.

For readers interested in India's economic transformation, entrepreneurship, leadership, corporate ethics and the responsibilities of citizenship, the book remains a worthwhile read. It is especially interesting when viewed alongside the subsequent evolution of India's economy and institutions, because it allows the reader to ask which of Murthy's aspirations have been realised, which remain unfinished, and which have become even more urgent.

A Better India, A Better World may not provide every answer to India's enormous developmental dilemmas, but it asks many of the right questions—and does so with an admirable faith in the possibility that a nation can become richer without becoming morally poorer.

Thursday, 6 August 2026

RBI (Commercial Banks – Governance) Third Amendment Directions, 2026

Executive Summary

The Reserve Bank of India (RBI) has issued the Reserve Bank of India (Commercial Banks – Governance) Third Amendment Directions, 2026, dated 30 July 2026, to align the governance and remuneration disclosure framework for commercial banks with the revised Basel Pillar 3 disclosure regime introduced through the Prudential Norms on Capital Adequacy) Seventh Amendment Directions, 2026. The amendments primarily revise the disclosure requirements relating to share-linked instruments and remuneration disclosures for Whole-Time Directors (WTDs), Managing Directors & CEOs (MD&CEOs), Chief Executive Officers (CEOs), and Material Risk Takers (MRTs). The Directions will come into force from 1 April 2027.

Background

The amendment follows RBI's revision of the Basel Pillar 3 disclosure framework and seeks to ensure consistency across the governance, financial reporting and capital adequacy frameworks applicable to commercial banks. Rather than maintaining separate disclosure requirements under the Governance Directions, RBI has harmonised the disclosures with those prescribed under the Commercial Banks: Financial Statements – Presentation and Disclosures Directions, 2025 and the Prudential Norms on Capital Adequacy Directions, 2025.

Key Amendments

1. Revised Framework for Share-Linked Instruments

The amendment substitutes Paragraph 63(3)(ii)(f) relating to share-linked instruments forming part of the variable remuneration of employees.

The revised provision stipulates that:

Share-linked instruments shall continue to form part of variable pay.
Every Private Sector Bank (PVB) must frame norms governing such instruments as part of its Board-approved compensation policy and in conformity with applicable statutory requirements.
Details of share-linked instruments granted must be disclosed in accordance with the disclosure requirements prescribed under the Financial Statements – Presentation and Disclosures Directions, 2025 and the Prudential Norms on Capital Adequacy Directions, 2025.
Such instruments must be fair valued on the date of grant using the Black-Scholes valuation model, and the resulting fair value should be recognised as an expense beginning with the relevant accounting period.

2. Revised Remuneration Disclosure Requirements

The amendment also substitutes Paragraph 63(7) to provide that every Private Sector Bank shall make annual disclosures relating to the remuneration of:

Whole-Time Directors (WTDs),
Managing Director & Chief Executive Officer (MD&CEO),
Chief Executive Officer (CEO), and
Material Risk Takers (MRTs),

as part of its Annual Financial Statements, in accordance with the disclosure framework prescribed under the Financial Statements – Presentation and Disclosures Directions, 2025 and the Prudential Norms on Capital Adequacy Directions, 2025, as amended from time to time.

3. Effective Date

The amendments will become effective from 1 April 2027, allowing banks adequate time to align their remuneration policies, governance frameworks and disclosure systems with the revised requirements.

Regulatory Significance

The amendment is primarily a harmonisation measure rather than a substantive change to remuneration governance. It aligns governance-related disclosures with RBI's revised Basel Pillar 3 disclosure architecture, ensuring consistency across prudential regulation, financial reporting and corporate governance.

The Directions reinforce:

greater transparency in executive remuneration;
consistency in disclosure practices;
standardisation of reporting across commercial banks; and
stronger governance over variable compensation and share-linked incentives.

Compliance Implications

Commercial banks, particularly Private Sector Banks, should:

Review and update Board-approved remuneration and compensation policies.
Ensure share-linked incentive schemes comply with the revised disclosure framework.
Incorporate the prescribed disclosure requirements into Annual Financial Statements.
Review valuation methodologies to ensure share-linked instruments are fair valued using the Black-Scholes model.
Update internal accounting systems to recognise the fair value of share-linked instruments as an expense from the relevant accounting period.
Train finance, human resources, risk management and compliance teams on the revised disclosure requirements.

Overall Assessment

The Governance Third Amendment Directions, 2026 are part of RBI's broader initiative to integrate governance, remuneration and prudential disclosures under a unified Basel Pillar 3 framework. Although the amendments do not materially alter the principles governing executive compensation, they improve the consistency, transparency and comparability of remuneration disclosures across the banking sector.

By requiring disclosures to be made through the revised Financial Statements and Capital Adequacy Directions and reaffirming the use of the Black-Scholes model for valuing share-linked instruments, RBI has strengthened governance standards while reducing duplication across regulatory frameworks. The amendments are expected to enhance the quality of disclosures and reinforce stakeholder confidence in banks' remuneration and governance practices.

Boards Need to Rethink How They Advise CEOs

Boards Need to Rethink How They Advise CEOs

From Oversight to Strategic Partnership in the Modern Boardroom

The relationship between a company's Board of Directors and its Chief Executive Officer has always been one of the defining elements of effective corporate governance. Traditionally, the board's role was clear: appoint the CEO, monitor performance, approve major strategic decisions, and intervene when leadership failed. The CEO, in turn, was expected to formulate strategy, manage operations, and deliver results. While this division of responsibilities remains fundamentally sound, the increasing complexity of today's business environment has blurred the boundaries between oversight and strategic counsel.

Artificial intelligence, geopolitical instability, cyber threats, climate risks, activist investors, rapidly changing consumer expectations, and relentless technological disruption have made the CEO's role more demanding than at any time in recent history. In response, modern boards are being called upon to evolve from passive supervisors into thoughtful strategic partners. This does not mean managing the business or encroaching upon executive authority; rather, it means providing informed counsel, challenging assumptions constructively, and helping CEOs navigate uncertainty.

The board of the future will be judged not merely by how well it monitors management, but by how effectively it enables leadership to succeed.

The Traditional Board–CEO Relationship

Historically, corporate governance rested on a relatively straightforward framework.

The board was responsible for:

appointing the CEO,
approving strategy,
safeguarding shareholder interests,
overseeing financial performance,
ensuring legal and regulatory compliance,
evaluating executive performance.

The CEO was responsible for:

running the organisation,
implementing strategy,
managing employees,
making operational decisions,
achieving financial objectives.

Communication between the board and management was often confined to scheduled meetings, formal reports, and periodic strategy sessions.

This model worked reasonably well in relatively stable business environments. However, today's corporate landscape is characterised by rapid and often unpredictable change, requiring far more dynamic engagement.

Why CEOs Need Boards Differently Today

The modern CEO faces a convergence of challenges that extend well beyond traditional management.

These include:

Artificial Intelligence transforming business models.
Geopolitical tensions disrupting global supply chains.
Cybersecurity threats posing existential risks.
Climate change influencing investment decisions.
Activist shareholders demanding immediate action.
Social media amplifying reputational risks.
Increased regulatory scrutiny across multiple jurisdictions.
Talent shortages and changing workforce expectations.

No individual, regardless of experience, possesses expertise across all these domains.

Consequently, the board's collective knowledge has become one of the organisation's greatest strategic assets.

Boards Must Ask Better Questions

One of the most important shifts advocated by governance experts is that boards should become better questioners rather than eager problem-solvers.

Poor board behaviour often takes the form of directors immediately offering solutions based on their personal experience.

For example:

"When I was CEO, we handled this by acquiring a competitor."

While well-intentioned, such advice can unintentionally constrain management's thinking.

Instead, effective boards ask questions such as:

What assumptions underpin this strategy?
Which alternative scenarios have been considered?
What evidence supports this investment?
What could cause this plan to fail?
How resilient is this strategy under adverse conditions?
What risks are we overlooking?
How would our competitors respond?

Insightful questions encourage deeper analysis without undermining executive accountability.

Oversight Is Not Micromanagement

One of the greatest risks in board governance is the temptation to micromanage.

Directors often possess extensive executive experience.

This experience is valuable.

However, it can become problematic when directors begin directing day-to-day operations.

Healthy governance distinguishes between:

Strategic oversight

Approving long-term direction.
Evaluating major risks.
Reviewing organisational capability.
Challenging strategic assumptions.

and

Operational management

Selecting suppliers.
Approving marketing campaigns.
Managing employees.
Running projects.
Negotiating contracts.

These remain management responsibilities.

A board that crosses this boundary weakens accountability by blurring who is ultimately responsible for outcomes.

The Board as a Strategic Sounding Board

Perhaps the most valuable contribution a board can make is serving as a confidential forum in which CEOs can test ideas before committing the organisation.

Unlike consultants, directors possess:

institutional knowledge,
fiduciary responsibility,
long-term perspective,
industry experience,
independence from day-to-day politics.

An effective CEO should feel comfortable discussing:

uncertain acquisitions,
disruptive technologies,
succession planning,
emerging risks,
organisational restructuring,
geopolitical concerns.

Without fear that vulnerability will be mistaken for weakness.

This requires trust.

Trust Is the Foundation of Effective Governance

The quality of board–CEO relationships depends less on formal governance structures than on interpersonal trust.

Trust enables CEOs to disclose:

mistakes,
uncertainties,
strategic dilemmas,
early warning signs,
unpopular decisions.

Conversely, CEOs who fear criticism may present only favourable information.

This creates a dangerous information asymmetry.

Boards should cultivate an environment where honest dialogue is encouraged rather than punished.

Diversity of Perspective Strengthens Advice

Modern governance increasingly recognises that homogeneous boards often reinforce existing assumptions.

A board composed exclusively of retired CEOs from the same industry may exhibit "groupthink."

Future boards increasingly seek diversity across:

professional backgrounds,
industries,
technology,
finance,
cybersecurity,
sustainability,
public policy,
behavioural science.

Different perspectives produce richer strategic discussions and reduce blind spots.

AI Is Changing the Nature of Board Advice

Artificial Intelligence introduces governance questions unlike any previous technological innovation.

Boards must help CEOs determine:

Which decisions should be automated?
Which require human judgment?
How should AI be governed?
What ethical principles should guide deployment?
How will regulators respond?
Are employees prepared for AI-driven transformation?

Directors do not need to be AI engineers, but they must possess sufficient literacy to advise intelligently.

Long-Term Thinking Versus Quarterly Pressure

Public companies frequently experience tension between long-term investment and short-term market expectations.

Boards should help CEOs maintain strategic discipline by asking:

Are we sacrificing future competitiveness for immediate earnings?
Which investments create sustainable advantage?
How should success be measured over five or ten years?

Boards should act as guardians of long-term value creation rather than merely monitors of quarterly performance.

Supporting the CEO During Crises

Leadership is most severely tested during periods of crisis.

Examples include:

cyberattacks,
product recalls,
activist campaigns,
pandemics,
regulatory investigations,
financial distress,
reputational controversies.

In such circumstances, the board's role shifts from routine oversight to active strategic support.

Effective boards:

remain calm,
provide perspective,
challenge decisions constructively,
approve emergency actions promptly,
avoid assigning blame prematurely.

A board's conduct during crises often determines the organisation's resilience.

CEO Evaluation Must Become Developmental

Traditional CEO evaluations have often focused on financial metrics:

revenue growth,
profitability,
shareholder returns.

While these remain important, modern evaluations increasingly consider:

leadership capability,
organisational culture,
succession planning,
innovation,
stakeholder relationships,
ethical conduct,
digital transformation,
talent development.

The objective is not merely to judge performance but to strengthen leadership.

The Board Chair as Facilitator

The board chair plays a pivotal role in shaping the quality of board advice.

An effective chair:

encourages robust discussion,
ensures all directors contribute,
prevents dominant personalities from controlling debate,
manages disagreements constructively,
maintains CEO confidence,
balances challenge with support.

The chair serves as the bridge between oversight and collaboration.

Implications for Company Secretaries

The Company Secretary has an increasingly important role in enhancing the effectiveness of board–CEO engagement.

This includes:

ensuring board papers focus on strategic issues rather than excessive operational detail,
providing directors with timely and relevant information,
facilitating high-quality board evaluations,
organising continuing education on emerging risks,
supporting effective meeting practices,
documenting decisions and rationale,
promoting governance processes that encourage informed and constructive dialogue.

By improving the quality of board information and deliberation, the Company Secretary enables directors to provide more valuable strategic counsel.

Common Pitfalls Boards Should Avoid

Even experienced boards can fall into patterns that diminish their effectiveness. Common pitfalls include:

Micromanagement: Becoming involved in operational decisions rather than focusing on governance.
Rubber-stamping: Approving management proposals without meaningful scrutiny.
Overconfidence: Assuming past executive experience automatically applies to today's challenges.
Information overload: Receiving excessive data without clear strategic insights.
Groupthink: Suppressing dissent or failing to explore alternative viewpoints.
Reactive governance: Focusing solely on immediate crises instead of anticipating future risks.
Overdependence on the CEO: Allowing one perspective to dominate board discussions.

Recognising and addressing these tendencies is essential for effective governance.

Practical Recommendations for Boards

Boards seeking to strengthen their advisory role should consider the following practices:

Allocate more meeting time to strategy and emerging risks than to routine compliance matters.
Encourage directors to frame discussions around questions rather than immediate solutions.
Conduct regular sessions without management present to promote candid dialogue.
Schedule periodic informal interactions between the chair and the CEO to build trust.
Invest in continuing education on AI, cybersecurity, geopolitics, and sustainability.
Refresh board composition periodically to introduce new expertise and perspectives.
Evaluate the quality of board discussions—not merely the quality of board decisions.

Conclusion

The boardroom is no longer a venue where directors simply approve budgets and review historical performance. In an era defined by technological disruption, geopolitical volatility, and unprecedented business complexity, boards must rethink how they advise CEOs. The most effective boards will neither retreat into passive oversight nor drift into operational management. Instead, they will become trusted strategic partners—challenging assumptions, broadening perspectives, and helping CEOs make better decisions in the face of uncertainty.

For governance professionals, particularly Company Secretaries, this evolution underscores the importance of creating the conditions for high-quality board deliberation. By ensuring that directors have the right information, the right expertise, and the right governance processes, they can help transform the board from a body that merely supervises management into one that actively contributes to the long-term resilience and success of the organisation.