Indian Stock Exchanges Intensify Board Compliance Crackdown Amid Governance Crisis

India's financial regulatory landscape is witnessing a significant shift as the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) intensify their crackdown on corporate governance violations, with multiple high-profile companies facing penalties for board-level non-compliance. This enforcement campaign underscores a broader systemic crisis in corporate governance standards across Indian publicly listed entities.

The recent actions against Garden Reach Shipbuilders & Engineers (GRSE), a defense public sector undertaking, highlight the exchanges' zero-tolerance approach to governance failures. GRSE has been penalized for multiple violations of corporate governance provisions, specifically concerning board composition and committee structures. The company received formal notices from both exchanges detailing the compliance breaches and imposing financial penalties.

Simultaneously, Mahanagar Telephone Nigam Limited (MTNL) faces a substantial penalty of ₹5.42 lakh for similar governance failures. The telecommunications provider's non-compliance issues mirror the broader pattern of governance deficiencies emerging across various sectors.

This regulatory tightening comes at a critical juncture when cybersecurity governance has become paramount. The enforcement actions reveal that many Indian companies lack adequate cybersecurity expertise at the board level, despite increasing digital threats. Regulatory authorities are particularly concerned about the absence of dedicated technology and cybersecurity committees in many organizations.

The compliance failures typically involve insufficient independent directors, inadequate representation of cybersecurity expertise, and improper constitution of mandatory board committees. These deficiencies become especially problematic as companies accelerate their digital transformation initiatives without corresponding enhancements in governance structures.

Industry analysts note that the exchanges' intensified monitoring reflects growing concerns about systemic risks to India's capital markets. The enforcement actions serve as a warning to all listed entities to strengthen their governance frameworks, particularly in areas involving technology oversight and cybersecurity risk management.

The regulatory focus extends beyond mere compliance checkboxes. Authorities are emphasizing the need for substantive governance improvements that address emerging challenges in cybersecurity, data protection, and digital infrastructure resilience. Companies are expected to demonstrate proactive measures in building cyber-resilient organizations with appropriate board-level oversight.

This crackdown coincides with India's broader digital economy expansion and increased cybersecurity threats targeting critical infrastructure. The timing underscores the interconnectedness of corporate governance and national security concerns, particularly for companies in defense, telecommunications, and financial services sectors.

Corporate governance experts suggest that companies should immediately review their board composition, ensure adequate cybersecurity expertise among directors, establish dedicated technology risk committees, and implement robust cybersecurity governance frameworks. The regulatory message is clear: governance failures will no longer be treated as minor compliance issues but as serious threats to investor protection and market integrity.

The exchanges' enforcement actions are expected to trigger a wave of governance reforms across Indian corporations. Companies are likely to accelerate their efforts to recruit directors with cybersecurity backgrounds, enhance board education programs on digital risks, and strengthen internal controls around technology governance.

As digital transformation continues to reshape business operations, the ability of boards to provide effective oversight of cybersecurity risks becomes increasingly critical. The current regulatory crackdown serves as a timely reminder that strong corporate governance is not just about regulatory compliance but about building resilient organizations capable of navigating complex digital landscapes.