Paper: GS – II, Subject: Governance, Topic: Broad/Overlap, Issue: Issues with the recent court judgements.
Context:
New Consultative Regulations: The Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) have recently issued policy frameworks detailing how they will publish and consult.
Key Highlights:
Objective: It is a step towards transparent and consultative rule-making, promoting accountability in the regulatory process.
What Did RBI and SEBI Propose?
- Impact analysis: RBI to conduct impact analyses when proposing/amending regulations.
- Public disclosure: SEBI to state the regulatory intent and objectives. It will invite public comments for 21 days and review regulations periodically.
Shift Toward Transparency: These reforms are steps toward better procedural safeguards, greater accountability and public consultation in law-making.
Gaps still exist:
- Lack of economic rationale: RBI framework doesn’t explicitly provide reasoning for the regulation.
- Lack of explanation: SEBI doesn’t fully explain the problem the regulation aims to solve.
- Limited scope for public comments: Public comments only on 2.4% of RBI circulars; SEBI at ~half of its regulations. No public explanation for accepted/rejected suggestions.
- Lack of systematic impact evaluation: Need a framework like the EU’s Better Regulation Framework which includes problem identification, impact estimation and evaluation mechanisms.
Measures needed New Consultative Regulations:
- Providing proof of market failure to justify intervention.
- Mandate cost-benefit analyses and impact assessments.
- Publish public consultation outcomes, accepted/rejected suggestions.
- Set regular review timelines.
- Improve clarity and transparency in consultation outcomes.
- Include stakeholders throughout the process.
Legal measures: Parliament should consider an Administrative Procedure Act (like in the US), mandating:
- Draft publication
- Public consultation
- Periodic review
Best practices: Learn from UK and Canadian models which set clear guidelines for regulatory governance.
Conclusion:
While RBI and SEBI have taken the first step toward consultative regulations making, stronger legal and procedural frameworks are necessary to make it meaningful and effective. Institutionalising transparency, accountability, and economic justification is crucial for democratic and effective regulation in India.
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