RBI framework suggest impact analysis before finalising regulations

RBI's new framework proposes mandatory public consultation, impact analysis, and periodic review for significant regulations, promoting transparency in rule-making

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The Reserve Bank of India (RBI) on Wednesday laid down a framework of board principles for the formulation of new regulations, which suggests that the regulator carry out an impact analysis of a proposed regulation before finalising it.

 

According to the framework, the regulator should publish a draft of the regulation and provide at least 21 days for stakeholders and members of the public to submit their comments. It also said the RBI may consider issuing a discussion paper eliciting responses to key issues and questions before preparing and publishing the draft regulation.

 

“If the Bank [RBI] decides to issue the final Regulation in a form substantially different from the draft that was issued for public comments, it may choose to repeat the process under this Framework,” the document said.

 

For any significant amendments to a regulation, the RBI should follow the same process of stakeholder consultation and provide 21 days for feedback.

 

“Before finalising the Regulation, the Bank shall conduct an impact analysis of the Regulation, to the extent feasible,” it added.

 

RBI Governor Sanjay Malhotra, in his first monetary policy address in February this year, emphasised the importance of balancing the costs and benefits of regulation, while reiterating the RBI’s commitment to stakeholder consultation in the regulatory process. The framework announced on Wednesday is seen as a continuation of that approach.

 

The framework also suggested a periodic review of regulations, taking into account the stated objectives, experience gained through surveillance, supervision and enforcement actions, relevant orders passed by courts or tribunals, and their relevance in a changing environment.

 

The provisions of the framework will not apply to regulations pertaining to internal, administrative or organisational matters, as determined by the RBI. This includes regulations governing the conduct of its meetings, as well as the administration and service conditions of its officers and employees.

 

The RBI also stated that it may dispense with or suitably modify any or all provisions of the framework in cases where confidentiality is required, or where adhering to the procedure under this framework would defeat the objectives or purpose of the proposed regulation.