Published: May 2025
Introduction
In a landmark move for financial governance and regulatory transparency, the Reserve Bank of India (RBI) has introduced its Framework for Formulation of Regulations. Announced on May 7, 2025, this framework is designed to standardize the process of creating and amending all RBI regulations, ensuring that every step is transparent, consultative, and grounded in rigorous impact analysis.
This initiative not only aligns RBI’s regulatory practices with global best standards but also reinforces its commitment to accountability, stakeholder engagement, and evidence-based policymaking.
Public Consultation: Transparency at the Core
Draft Publication and Stakeholder Engagement
A central pillar of the framework is public consultation. Before issuing any regulation, the RBI will:
- Publish the draft regulation on its official website (www.rbi.org.in).
- Accompany the draft with a comprehensive “statement of particulars,” which includes:
- The specific legal provisions enabling the regulation
- The objectives of the regulation, including a feasible impact analysis
- References to guidance from international standard-setting bodies and best practices
- The proposed method for implementation
- Clear timelines for public comment
Consultation Timeline and Feedback
- The RBI will provide at least 21 days for stakeholders and the public to submit comments.
- All feedback will be carefully considered. The RBI will publish a general statement of its response to the comments, alongside the final regulation.
- If the final regulation differs substantially from the draft, the RBI may repeat the consultation process to ensure continued transparency and inclusivity.
Additional Consultation Mechanisms
Where necessary, the RBI may:
- Issue discussion papers before drafting a regulation to elicit early feedback on key issues.
- Explore other mechanisms for engaging with stakeholders, ensuring a broad and meaningful consultation process.
Impact Analysis: Evidence-Based Policymaking
Before finalizing any regulation, the RBI will conduct an impact analysis to the extent feasible. This ensures that every regulation is not only well-intentioned but also practical, effective, and proportionate to its objectives.
Amendments: Consistency and Rigor
Any significant amendment to an existing regulation will be subject to the same robust process as new regulations, including public consultation and impact analysis. This ensures that regulatory changes are always subject to scrutiny and stakeholder input.
Periodic Review: Ensuring Relevance and Reducing Redundancy
The RBI commits to periodically reviewing all regulations in force, considering The original objectives of the regulation
- Experience from surveillance, supervision, and enforcement
- Relevant court or tribunal orders
- Global best practices and standards
- The regulation’s relevance in a changing environment
- Opportunities to reduce redundancies
- Any other factor the RBI considers relevant
This ongoing review process guarantees that regulations remain up-to-date, effective, and aligned with both domestic needs and international expectations.
Exceptions: Flexibility Where Needed
The framework recognizes that certain situations require flexibility. It does not apply to:
- Internal, administrative, or organizational matters (e.g., meeting conduct, staff administration)
- Purely procedural changes with no substantive impact
- Regulations issued to specific entities (not general in nature)
Further, the RBI may modify or bypass the framework in cases where:
- Confidentiality must be maintained
- Following the procedure would defeat the regulation’s purpose
- Public interest or urgent intervention is required
In all such cases, the RBI will record the reasons for deviating from the standard process.
Savings and Validity
- All existing regulations remain valid as of the date of this framework’s issuance.
- Any future changes to these regulations must follow the new framework.
- No regulation or action will be invalidated solely due to non-adherence to the framework, ensuring regulatory continuity.
Legal Foundations: Comprehensive Coverage
The framework draws its authority from a wide array of statutes, including:
- Reserve Bank of India Act, 1934
- Banking Regulation Act, 1949
- National Housing Bank Act, 1987
- Payment and Settlement Systems Act, 2007
- Credit Information Companies (Regulation) Act, 2005
- Factoring Regulation Act, 2011
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
- Foreign Exchange Management Act, 1999
- Government Securities Act, 2006
- Prevention of Money Laundering (Maintenance of Records) Rules, 2005
- Special Economic Zones Act, 2005
Conclusion: A New Era for Regulatory Governance
The RBI’s Framework for Formulation of Regulations marks a transformative step in Indian financial regulation. By embedding transparency, stakeholder engagement, impact analysis, and periodic review into the heart of rulemaking, the RBI is setting a new gold standard for regulatory governance.
This framework not only enhances the legitimacy and effectiveness of regulations but also fosters greater trust among market participants, financial institutions, and the public. It is a model of best practice that other regulators, both in India and globally, would do well to emulate.
Contributed by Adhwaith, India Fintech Foundation
