Intro: SEBI has issued an important clarification impacting listed banks and public sector banks, reinforcing board-level accountability under corporate governance norms and resolving overlap concerns between SEBI and RBI regulations.
SEBI has clarified that listed entities, including public sector banks, must present their quarterly corporate governance compliance reports to the full board of directors and cannot assign this duty to board committees like the audit committee. The listing rules on corporate governance will take precedence over RBIs for listed banks.
SEBI Clarification on Corporate Governance Reporting
Punjab National Bank (PNB), which had requested SEBI’s interpretive opinion on compliance with Regulation 27 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, received the clarification in the form of an informal guidance.
PNB had maintained that the Reserve Bank of India’s Commercial Banks – Governance Directions, 2025, permitted public sector banks to delegate specific tasks, such as adhering to legal and regulatory obligations, to board committees in order to free up the board to focus more on strategic matters.
📌 SEBI vs RBI: Governance Priority Explained
- Applies To: Listed banks & public sector banks
- Key Rule: Full board must review governance compliance
- SEBI View: LODR Regulations take precedence
- Delegation: Not allowed to audit or board committees
- Objective: Strong board-level accountability
The bank asked SEBI for its opinion on whether the audit committee or another board committee of a similar nature might be given responsibility for overseeing the Quarterly Integrated Governance Report in light of this regulatory framework.
SEBI’s Stand on LODR Regulations
However, SEBI stated that the LODR Regulations and its December 31, 2024, circular, which were issued to make it easier for listed businesses to do business, differ from and are not diluted by the RBI’s governance framework.
“The monitoring of compliance requirements by a committee of the Board of Directors in terms of the RBI Directions cannot be viewed as compliance” with the provisions of the LODR Regulations and SEBI circulars, according to SEBI’s informal guidance letter.
🧭 SEBI Informal Guidance: How It Helps Banks
- Purpose: Clarify regulatory interpretation
- Process: Paid request by regulated entities
- Benefit: Prevents future regulatory violations
- Status: Non-binding, fact-specific
- New System: Dedicated SEBI nodal cell
Additionally, PNB notified SEBI that it had asked the National Stock Exchange for clarity, and that the exchange had responded negatively to their request to permit such a delegation.
Nature of SEBI’s Informal Guidance
SEBI stressed that the informal advise was not a legally binding decision of the SEBI Board, but rather was issued based on the particular facts that the bank submitted. It also pointed out that a different regulatory outcome can result from a different factual matrix.
Other listed public sector banks and regulated firms facing conflicting governance standards under the SEBI and RBI frameworks should find clarity in the informal guidelines, especially with regard to board-level accountability for corporate governance disclosures.
Role of SEBI’s Nodal Cell for Informal Guidance
By paying a fee, regulated firms can request SEBI’s opinion on regulatory matters under the informal guidance system. This increases regulatory clarity and assists companies in avoiding regulatory infractions prior to choices being carried out. For informal guidance, SEBI recently established a nodal cell. Previously, the relevant department handled these inquiries; today, the nodal cell facilitates them.
Frequently Asked Questions
1. What has SEBI clarified about listed banks’ compliance with corporate governance?
SEBI made it clear that listed banks cannot assign this duty to board committees like the audit committee; instead, they must provide their quarterly corporate governance compliance reports to the entire board of directors.
2. Which rule served as the focal point of this explanation?
The clarification pertains to SEBI’s circular dated December 31, 2024, as well as Regulation 27 of the SEBI (LODR) Regulations, 2015.
3. For what reason did Punjab National Bank (PNB) ask SEBI for advice?
PNB requested advice since the RBI’s Commercial Banks – Governance Directions, 2025 provide for the transfer of compliance supervision to board committees. PNB also wanted to know if SEBI regulations permitted this delegation.
4. Does the RBI’s governance structure take precedence over SEBI’s LODR regulations?
The RBI’s governance guidelines do not supersede or weaken SEBI’s LODR Regulations for listed companies, as SEBI made very clear.
5. Do all banks have to abide by SEBI’s informal guidelines?
No, SEBI explained that the informal guidance is fact-specific, non-binding, and that a different regulatory interpretation may arise from a different factual circumstance.
Conclusion
The clarification from SEBI strengthens board-level responsibility for listed banks’, particularly public sector banks’, adherence to corporate governance. SEBI has eliminated uncertainty regarding delegation to board committees by stating that LODR rules take precedence over RBI’s governance structure in issues of disclosure and compliance reporting.
The guidance provides listed banks negotiating overlapping SEBI and RBI requirements with a strong regulatory signal, despite the fact that it is informal and non-binding. The action also demonstrates SEBI’s increased focus on proactive compliance through its updated nodal cell structure and informal guidance mechanism.
Disclaimer: This article is for informational purposes only and does not constitute legal, regulatory, or investment advice.
