Another very important part of the governor’s statement which largely went unnoticed by the media was that the recommendations of the Regulatory Review Authority (RRA 2.0) have been largely implemented by the RBI. The governor said that internal review groups were formed within the RBI to simplify regulations and reporting and, based on the recommendations of RRA 2.0 and the groups, more than 1,000 circulars have been withdrawn. This is by no measure a small feat for regulated entities (REs). RBI issued around 150 circulars in 2023 and 215 circulars in 2022 (18 of 2022 circulars were to withdraw circulars on the behest of RRA), so the withdrawal of more than 1,000 circulars means undoing more than five years’ worth of incremental compliance burden. The governor also credited RRA 2.0 for setting a new benchmark for meaningful engagement between the regulator and REs and said the consultative should continue. The RRA 2.0 reflects a paradigm shift in structured engagement between Mint Road and REs. The RBI has followed up with the top management meeting of the assurance functions heads recently, conveying their expectations, and more importantly, listening to the feedback from REs. As a member of the advisory group, I was witness to the transparency shown by the top management in sharing the central bank’s thought process.
While the communicative avatar of the RBI has been the talk of the town, the point which many have missed is that communication is now not limited to esoteric topics such as monetary policy and financial markets and the engagement is not limited to a privileged few. The RBI has become more engaging on topics which were earlier forbidden territory: Regulation was one such area. Under Das and Deputy Governor Rajeshwar Rao, regulation-making has transitioned into a collaborative exercise with changes first being brought in the form of a discussion paper or a draft circular. This has not only made life easy for REs by giving them time to plan for upcoming regulations, but also reduced the need for frequent clarifications, FAQs and mail-box clarifications issued by the regulatory department. I don’t think that without this approach, the industry would have been adjusted so seamlessly to path-breaking regulations such as the digital lending guidelines or those for account aggregators. Take for instance the circular on investments in the schemes of alternate investment funds. The regulator heard the industry and revised the guidelines before the financial year end.
RRA marked a turning point in RBI’s strategy to engage with stakeholders in reducing the compliance burden. The forward-looking nature of its recommendations would continue to impact our financial system for a long time to come. RRA has set the tone for the structured industry-regulator dialogue, and I hope the RBI will continue the good work started by RRA and make it a permanent body.
The writer is founder and partner - Duvvuru & Reddy LLP; and member of the Regulatory Review Authority 2.0
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