The Reserve Bank of India has issued compliance function directions for commercial banks that take effect immediately and replace existing requirements. They apply to banking companies, corresponding new banks and the State Bank of India, but exclude small finance banks, payments banks and local area banks. The framework sets minimum standards for proportionate, independent and adequately resourced compliance functions, including group-wide compliance risk management for bank-led financial conglomerates. Boards must approve and review compliance policies annually, assess the compliance function quarterly and keep it separate from internal audit. Banks must conduct annual compliance risk assessments, report material failures promptly, test compliance, disclose regulatory noncompliance and related corrective action in annual reports, and intensively monitor new products for their first six months. Quality assurance programs must undergo an independent external review at least once every three years. Each bank must appoint an independent chief compliance officer for a fixed tenure of at least three years, with direct access to senior management and the board or audit committee, no business targets and no conflicting responsibilities. Banks must also deploy integrated, enterprise-wide workflow tools that identify and monitor obligations, escalate breaches, record approvals for delays or deviations, and provide senior management with a unified compliance dashboard.

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