Consultative Regulation-making, let’s explore it further!

This comes after a comparable action by the Securities and Exchange Board of India (SEBI), which released guidelines outlining the process it would undertake to implement regulations.

RBI and SEBI, as statutory regulators with quasi-legislative authority, have begun reforms aimed at enhancing transparency and accountability in the regulatory process.

These changes align with international standards and are crucial to maintain the rule of law.

Recent Changes

The RBI will now perform impact assessments prior to implementing regulations.

SEBI will elucidate the regulatory aims and purposes of its suggestions.

The two regulators will seek public feedback for a minimum of 21 days and will regularly evaluate their current regulations.

Importance

Enhances Democratic Legitimacy: It guarantees that regulations set by non-elected entities (such as RBI and SEBI) are answerable to democratic processes.

Enhances Regulatory Standards: Engaging stakeholders (companies, specialists, community organizations) allows regulators to create improved, more efficient regulations.

Boosts Public Confidence: Openness in creating regulations fosters trust in the regulatory system.

Improves Compliance and Execution: Regulations created with input are more likely to be feasible and applicable, resulting in enhanced adherence.

Enables Regular Assessment and Reform: Public feedback and established review processes guarantee that obsolete or ineffectual regulations are recognized and revised or abolished.

Complies with Global Best Practices: Leading regions such as the US, UK, and the EU have established consultative processes.

Difficulties

Delays the Regulatory Process: Consultation and impact evaluation prolong the regulation development timeline.

Risk of Regulatory Influence: Strong interest groups or industry associations might overshadow discussions.

Resource and Capacity Limitations: Regulatory bodies such as the RBI and SEBI encounter restricted administrative abilities and technical knowledge.

Performing thorough impact evaluations, public consultations, and cost-benefit analyses for every regulation may overwhelm staff and shift resources away from enforcement or oversight.

Confidentiality and Sensitivity: Some regulatory issues (e.g., monetary policy, cybersecurity, systemic risks) necessitate confidentiality.

In conclusion

With changes implemented by the RBI and SEBI, India has started the transition to more open and consultative financial regulation-making.

To institutionalise sound regulatory practices generally, however, more measures are required, such as requiring economic justification, bolstering accountability systems, and passing a thorough procedural law.