The Reserve Bank of India (RBI) has significantly broadened its public engagement efforts, conducting 72 public consultations across various regulatory and supervisory domains over the past three years. According to RBI’s annual report, this proactive approach aims to enhance transparency, inclusiveness, and robustness in policy formulation and implementation.
In the financial year 2023-24 alone, the RBI held 40 public consultations, demonstrating a marked increase in stakeholder engagement compared to previous years. The Department of Regulation (DoR), responsible for formulating guidelines for regulated entities, conducted 21 public consultations in 2023-24, a significant rise from six and five in the previous two years respectively. This department has been pivotal in seeking public feedback on new and major regulatory measures, as well as incremental changes and comprehensive reviews of existing guidelines.
The Department for Payments and Settlements (DPSS) and the Department of Supervision (DoS) have also intensified their consultations with stakeholders. This increased engagement is part of a broader strategy to seek public feedback on various regulatory aspects, ensuring that the policies are well-rounded and address the needs and concerns of all stakeholders.
Between 2021 and 2024, the RBI provided a window of 15-60 days for public feedback on its consultations, covering a wide range of regulatory and supervisory areas. This period allowed for thorough consideration of public input, ensuring that the final guidelines are well-informed and comprehensive.
The move to place draft instructions in the public domain for feedback, a recommendation from the Regulations Review Authority 2.0 in 2022, underscores RBI’s commitment to transparency. The process involves posting working group reports, discussion papers, and draft guidelines on the RBI’s website, inviting public comments before finalization.
To further facilitate detailed discussions, the RBI conducts in-house consultations and sets up advisory committees. Frequently Asked Questions (FAQs) are issued to address stakeholder queries, providing continuous feedback and clarification on regulatory measures.
On November 16, 2023, the RBI announced new regulatory measures on consumer credit and bank credit to Non-Banking Financial Companies (NBFCs). This move was aimed at preempting potential risks associated with the post-pandemic surge in credit offtake in the consumer segment and the growing reliance of NBFCs on bank borrowings. Despite the strong asset quality, prudential intervention was deemed necessary to mitigate potential risks.
The participative approach adopted by the RBI helps identify inconsistencies, gaps, and stakeholder concerns, leading to more robust regulations. Periodic interactions with stakeholders on monetary policy and other issues further enhance transparency and inclusiveness in policy formulation.
The Department of Supervision initiated several measures in 2023-24 to strengthen both onsite and offsite supervision. This includes revamping the stress testing model and enhancing the early warning signal and fraud risk management systems. These measures aim to ensure a more resilient financial system capable of withstanding potential shocks.
The FinTech Department also expanded the scope of central bank digital currency (CBDC) pilots, both wholesale (CBDC-W) and retail (CBDC-R), and launched a pilot project for a public tech platform aimed at providing frictionless credit. These initiatives reflect RBI’s forward-thinking approach to leveraging technology for better financial inclusion and efficiency.
On September 21, 2023, the RBI issued a draft Master Direction on Wilful and Large Defaulters. This draft consolidates all instructions on willful and large defaulters, incorporating modifications based on court judgments and feedback from the Indian Banks’ Association, banks, and other stakeholders. The final guidelines will be issued after evaluating these comments, ensuring that the policy is well-rounded and considers various perspectives.
The principal channel for public consultations remains seeking written comments and feedback on draft regulatory policies. However, other modes of public consultations, such as discussions with stakeholders and independent working groups or committees, are also employed to gain a holistic view on complex regulatory issues. The need for public consultation is evaluated while assessing policy risk, highlighting RBI’s commitment to comprehensive stakeholder engagement.
By broadening its public engagement efforts, the RBI aims to create a more transparent, inclusive, and resilient regulatory framework that addresses the evolving needs of the financial sector.
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