RBI's regulations need periodic review to align them with evolving industry practices: RRA

RBI's Regulations Review Authority has suggested all regulations of the central bank should underline the rationale and be reviewed periodically to align them with evolving industry practices and the financial landscape.

Regulations Review Authority (RRA 2.0) was set up by the Reserve Bank of India in April last year to reduce the compliance burden on Regulated Entities (REs) by streamlining the regulatory instructions and rationalizing reporting requirements.

''The recommendations of the RRA would be internalized by the Reserve Bank to achieve the intended outcomes. The RRA exercise should, going forward, result in clarity, simplification, accessibility, and rationalization in regulatory instructions and returns,'' the central bank said in a statement.

The RRA 2.0, in its report, also recommended that any ad hoc return introduced for capturing specific data should be prescribed with a sunset clause of not more than six months duration.

''To address gaps in understanding, interpreting, and implementing the instructions, the regulatory instructions should contain a brief statement of object underlying the rationale for issuance of instructions,'' it said.

The instructions should be supplemented with FAQs/guidance notes and illustrations, wherever necessary, added.

The RRA has also suggested a periodic review of existing regulations for aligning them with evolving developments in the industry practices and financial landscape.

It has recommended the elimination of paper-based returns and suggested a periodic review of regulatory and supervisory returns filed by the REs at least once in three years to ascertain their relevance and periodicity.

Also, ''all the contents posted on the RBI website may be updated on a real-time basis. The RBI website layout may be enhanced to make it more interactive and convenient for navigation'' it said.

All instructions on the RBI website may be categorized subject-wise, function-wise, and based on the category of regulated entities with the necessary linkages to relevant FAQs, consultative papers, and master directions, among others.

The report also noted that drafting of regulations involves capturing the policy proposals in a precise manner and achieving the intended effect by logically organizing the text and providing clarity of expression.

''It is, therefore, imperative that the officials involved in the drafting of regulations are trained appropriately,'' it said and added the officers would need continuous orientation and training.

The first Regulations Review Authority was formed in 1999. After two decades, considering the evolution of the regulatory perimeter and development of the regulatory functions of the Reserve Bank, RRA 2.0 was constituted.

A 2.0 has recommended the withdrawal of 714 circulars in four tranches of interim recommendations. It had also recommended discontinuation/merger/conversion to online filing of 65 regulatory returns.