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