TITLE: India's Reserve Bank Amends Payments Banks Governance Directions on Remuneration Disclosures
BODY:
On July 30, 2026, the Reserve Bank of India (RBI) issued the Reserve Bank of India (Payments Banks – Governance) Third Amendment Directions, 2026, modifying governance requirements for payments banks operating in India.
The amendment addresses two key areas of remuneration governance. First, it revises requirements for share-linked instruments as variable pay components. Under the updated framework, payments banks must fair value share-linked instruments on the grant date using the Black-Scholes model, with the resulting fair value recognised as an expense beginning with the accounting period for which approval has been granted. Banks must frame norms for granting share-linked instruments in conformity with relevant statutory provisions, incorporating these norms into their compensation policies. Details of share-linked instruments granted must be disclosed in accordance with the Reserve Bank of India (Payments Banks: Financial Statements – Presentation and Disclosures) Directions, 2025 and the Reserve Bank of India (Payments Banks – Prudential Norms on Capital Adequacy) Directions, 2025.
Second, the amendment modifies disclosure requirements for remuneration of Whole-Time Directors (WTDs), Managing Directors and Chief Executives (MD&CEOs), and Material Risk Takers (MRTs). Payments banks must now disclose remuneration information for these roles on an annual basis at minimum in their Annual Financial Statements, as prescribed in the applicable RBI directions.
The amendment was issued under Section 35A of the Banking Regulation Act, 1949, following 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.
The amendments come into force on April 1, 2027, providing payments banks with nine months to align their governance and disclosure practices accordingly.