RBI Issues Third Amendment to Payments Banks Governance Directions: Key Changes to Variable Pay and Remuneration Disclosures

Overview of the Amendment

The Reserve Bank of India has issued the Reserve Bank of India (Payments Banks – Governance) Third Amendment Directions, 2026, dated July 30, 2026. These directions amend the existing Reserve Bank of India (Payments Banks – Governance) Directions, 2025 and introduce specific modifications relating to share-linked instruments as a component of variable pay and the annual disclosure requirements for remuneration of key managerial personnel. The amendments are set to take effect from April 1, 2027.

The circular has been issued under RBI Reference No. RBI/DOR/2026-27/208 DOR.ACC.REC.No.186/29.67.001/2026-27.

Background and Regulatory Context

The impetus for this amendment stems from a regulatory review conducted by the Reserve Bank of India, particularly following the release of the Reserve Bank of India (Small Finance Banks – Prudential Norms on Capital Adequacy) Fifth Amendment Directions, 2026, which addressed Basel Pillar 3 disclosures. Recognising the need for consistency and alignment across regulated entities, the RBI extended corresponding changes to the governance framework applicable to Payments Banks.

The amendment has been issued in exercise of the powers vested under Section 35A of the Banking Regulation Act, 1949, along with all other applicable enabling provisions. The Reserve Bank has stated that it is satisfied that the issuance of these directions is necessary and expedient in the public interest.

Note: These amendments are not standalone policy changes — they form part of a broader regulatory alignment exercise initiated following Basel Pillar 3 disclosure updates for Small Finance Banks.

Key Amendments: What Has Changed

Substitution of Paragraph 37(3)(ii)(f) — Share-Linked Instruments

One of the two primary changes introduced by this amendment concerns share-linked instruments as a component of variable pay for key personnel in Payments Banks. The existing provision under Paragraph 37(3)(ii)(f) of the Reserve Bank of India (Payments Banks – Governance) Directions, 2025 has been replaced in its entirety.

The substituted paragraph reads as follows: