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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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Practical Recommendations for Boards

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

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

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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.

RBI (Commercial Banks – Asset Liability Management) Second Amendment Directions, 2026

Executive Summary

The Reserve Bank of India (RBI) has issued the Reserve Bank of India (Commercial Banks – Asset Liability Management) Second Amendment Directions, 2026, dated 30 July 2026, to align the disclosure requirements under the Asset Liability Management (ALM) Directions, 2025 with the revised Basel Pillar 3 disclosure framework introduced through the Prudential Norms on Capital Adequacy) Seventh Amendment Directions, 2026. The amendments primarily update the cross-references for the disclosure of the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR), ensuring consistency across RBI's prudential and disclosure frameworks. The Directions will come into force from 1 April 2027.

Background

The RBI reviewed the existing Commercial Banks – Asset Liability Management Directions, 2025 following the introduction of the revised Basel Pillar 3 disclosure framework. To eliminate duplication and ensure uniformity in regulatory reporting, the RBI has amended the ALM Directions so that banks refer to the disclosure requirements prescribed in the relevant Financial Statements and Capital Adequacy Directions rather than maintaining separate disclosure formats within the ALM framework.

Key Amendments

1. Revision of LCR Disclosure Requirements

The amendment substitutes Paragraph 204 of the ALM Directions. Banks are now required to refer to the disclosure templates and related instructions prescribed under:

• Reserve Bank of India (Commercial Banks – Financial Statements: Presentation and Disclosures) Directions, 2025; and
• Reserve Bank of India (Commercial Banks – Prudential Norms on Capital Adequacy) Directions, 2025

for disclosures relating to the Liquidity Coverage Ratio (LCR).

2. Revision of NSFR Disclosure Requirements

Similarly, Paragraph 250 has been substituted to require banks to follow the disclosure templates and instructions contained in the above Directions for disclosures relating to the Net Stable Funding Ratio (NSFR).

3. Effective Date

The amended provisions will become effective from 1 April 2027, providing banks sufficient time to align their disclosure frameworks, reporting systems and internal controls with the revised requirements.

Regulatory Significance

Although the amendments are procedural rather than substantive, they are important from a governance and disclosure perspective. By consolidating disclosure requirements under the Financial Statements and Basel Pillar 3 Directions, RBI has promoted:

• consistency in regulatory reporting;
• harmonisation of liquidity disclosures;
• reduced duplication across regulatory frameworks; and
• improved comparability of disclosures among banks.

The amendments are part of RBI's broader effort to streamline prudential regulation while aligning Indian banking disclosures with internationally accepted Basel standards.

Compliance Implications

Banks should undertake the following actions before 1 April 2027:

• Review ALM policies and disclosure manuals.
• Update internal reporting templates for LCR and NSFR disclosures.
• Align disclosure processes with the revised Financial Statements and Basel Pillar 3 Directions.
• Modify reporting systems and compliance checklists to reflect the revised cross-references.
• Train finance, treasury, risk management and compliance teams on the updated disclosure framework.

Overall Assessment

The Asset Liability Management Second Amendment Directions, 2026 represent a targeted but important refinement of RBI's regulatory architecture. Rather than introducing new liquidity norms, the amendments rationalise the disclosure framework by directing banks to a single, harmonised source for LCR and NSFR disclosures.

By integrating the ALM Directions with the revised Basel Pillar 3 disclosure regime, RBI has reinforced consistency, transparency and regulatory coherence in liquidity reporting. While the operational impact is expected to be modest, banks should use the transition period to update their governance processes, reporting systems and disclosure practices ahead of the 1 April 2027 implementation date. 

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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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

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.

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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.