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The Reserve Bank of India has proposed changes to improve how bank boards function and to support MSMEs with easier access to financing platforms. The regulator plans to streamline board-level guidelines to allow more focus on strategy and risk oversight. It has also suggested removing due diligence requirements for MSMEs joining TReDS to improve credit access. In addition, the RBI is expanding participation in the term money market to include non-bank entities. These steps follow a broader effort to simplify regulatory and supervisory instructions and reduce compliance burden across the financial system.
The Reserve Bank of India (RBI) has proposed a revision and rationalisation of guidelines governing matters placed before bank boards, with the aim of improving efficiency and enabling more focused discussions on strategy and risk management. The move is part of a broader effort to improve ease of doing business in the banking system. Advertisement
Currently, decisions on what matters are presented before bank boards, along with their frequency, are largely determined by the boards themselves within a framework of seven themes prescribed by the RBI. In addition, the central bank mandates certain items to be presented for approval, review, or information. The RBI stated that it has undertaken a comprehensive review of these instructions to ensure boards can use their time more effectively and engage in higher-quality discussions. Draft directions on the revised framework are expected to be released shortly for public consultation.
This development comes in the backdrop of governance concerns in the banking sector, highlighted by the recent mid-term resignation of HDFC Bank Chairman Atanu Chakraborty. In his resignation letter submitted in mid-March, Chakraborty had indicated that certain developments and practices within the bank over the past two years were not aligned with his personal values and ethics, which led to his decision to step down. His exit marked a rare instance of a part-time chairman leaving before completing the tenure, raising questions around internal governance.
Alongside governance reforms, the RBI has also continued its work on simplifying regulatory structures. The central bank had earlier consolidated over 9,000 regulatory instructions into 238 Master Directions in 2025, organised by function and type of regulated entity. A similar consolidation has now been completed for supervisory instructions, further streamlining compliance requirements. Drafts of 64 Master Directions covering multiple functional areas have been published for public feedback.
To support micro, small and medium enterprises (MSMEs), the RBI has proposed removing the requirement for due diligence when onboarding these entities onto Trade Receivables Discounting System (TReDS) platforms. Introduced in 2014 and updated in 2018, TReDS enables MSMEs to access working capital by discounting their trade receivables. The platform was expanded in 2023 to include insurance companies as participants. The proposed relaxation is aimed at encouraging more MSMEs to use the platform and improving their access to timely financing.
In another measure, the RBI has proposed expanding participation in the term money market. At present, only banks and standalone primary dealers are allowed to operate in this segment, subject to prudential limits. The central bank now plans to include additional non-bank participants such as all-India financial institutions, non-banking financial companies including housing finance companies, and corporates. It also intends to enhance borrowing limits for standalone primary dealers. This step is expected to improve liquidity and deepen the market, while strengthening the transmission of monetary policy across different interest rate segments.
The RBI noted that these measures are part of its ongoing effort to refine the regulatory and supervisory framework while reducing compliance costs and improving efficiency across the financial system.
Source PTI
5th Jun, 2025
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