RBI Establishes Regulatory Review Cell from October 1 for Adaptive Financial Norms
Mumbai, September 19, 2025 – The Reserve Bank of India (RBI) has unveiled plans to launch a Regulatory Review Cell (RRC) effective October 1, 2025, a strategic initiative aimed at ensuring the nation’s financial regulations remain dynamic and responsive to the rapidly evolving economic landscape. Operating under the RBI’s Department of Regulation (DoR), the RRC will conduct systematic reviews of all regulatory guidelines every five to seven years, fostering an adaptable framework that balances innovation, stability, and compliance in India’s financial sector.
This move comes as India navigates a complex financial environment marked by digital transformation, fintech proliferation, and global economic challenges. The RRC is poised to streamline regulations, eliminate redundancies, and enhance stakeholder collaboration, reinforcing the RBI’s commitment to a robust and inclusive financial ecosystem.
Genesis of the Regulatory Review Cell
The RBI’s regulatory framework governs a vast array of entities, including commercial banks, non-banking financial companies (NBFCs), payment systems, and foreign exchange operations. While the RBI has periodically updated its guidelines, the process has often been ad hoc, relying on temporary bodies like the Regulatory Review Authority (RRA 2.0), which successfully withdrew over 400 outdated circulars between 2021 and 2023. The RRC institutionalizes this process, ensuring consistent and proactive regulatory oversight.
The decision to establish the RRC was announced on September 17, 2025, following consultations with industry stakeholders and internal assessments. RBI Governor Sanjay Malhotra, speaking at the FIBAC 2025 conference in Mumbai, underscored the need for “a forward-looking regulatory approach that anticipates technological and economic shifts while safeguarding financial stability.” The initiative aligns with the RBI’s existing Framework for Formulation of Regulations, which emphasizes periodic evaluations based on supervisory data, enforcement outcomes, and stakeholder feedback.
Structure and Function of the RRC
The RRC will operate as a specialized unit within the DoR, with a clear mandate to review and refine regulations systematically. Key features include:
- Periodic Review Cycle: All RBI regulations will undergo internal review every 5-7 years to assess their relevance, effectiveness, and alignment with current economic realities. Reviews will be phased to minimize disruption to regulated entities.
- Data-Driven Approach: The RRC will leverage surveillance data, supervisory insights, and enforcement records to identify gaps or redundancies in existing norms.
- Stakeholder Engagement: A minimum 21-day public consultation period will be mandatory for proposed regulatory changes, ensuring input from banks, NBFCs, fintech firms, and other stakeholders.
- Leadership and Composition: The RRC will be headed by Rana Ashutosh Kumar Singh, Managing Director of the State Bank of India (SBI), and will include five other members with expertise in banking, regulation, and compliance. The cell is established for an initial three-year term, extendable by two years based on performance.
- Advisory Support: An independent Advisory Group on Regulation (AGR), chaired by N.S. Kannan, former MD & CEO of ICICI Prudential Life Insurance, will complement the RRC. The AGR, comprising external experts from institutions like Federal Bank and Sundaram Finance, will provide industry perspectives to ensure practical and balanced reforms.
Strategic Objectives and Expected Impact
The RRC is designed to address several pressing challenges in India’s financial sector:
- Simplifying Compliance: By identifying and repealing outdated or overlapping regulations, the RRC aims to reduce compliance burdens, particularly for smaller banks and NBFCs. For example, past RRA efforts streamlined KYC norms, saving institutions an estimated 12-15% in compliance costs.
- Fostering Innovation: The cell will prioritize updating norms to accommodate emerging technologies like AI-driven lending, blockchain-based payments, and green finance, positioning India as a global fintech leader.
- Enhancing Resilience: Regular reviews will help the RBI address risks such as cybersecurity threats, climate-related financial exposures, and geopolitical disruptions affecting cross-border transactions.
- Boosting Stakeholder Confidence: Transparent consultation processes and external input via the AGR will enhance trust among regulated entities, encouraging investment and growth.
The initiative is expected to align India’s regulatory framework with global best practices, drawing parallels with mechanisms like the U.S. Federal Reserve’s periodic regulatory reviews or the European Central Bank’s supervisory assessments. This could strengthen India’s position as a financial hub, especially as it eyes a projected GDP growth of 6.6% for FY25-26.
Industry and Expert Reactions
The announcement has garnered widespread support from the financial sector. Dinesh Khara, Chairman of SBI, described the RRC as “a game-changer for aligning regulations with the needs of a digital-first economy.” Fintech leaders echoed this sentiment, with Paytm’s Vijay Shekhar Sharma noting on X that “a dynamic regulatory framework is critical for India to lead in global fintech innovation.”
The Indian Banks’ Association (IBA) urged the RRC to prioritize digital asset regulations and cybersecurity norms in its initial phase, citing rising incidents of cyber fraud. Meanwhile, academics like Dr. Arvind Gupta from IIM Ahmedabad praised the inclusion of the AGR, stating, “External expertise will ensure regulations are not only robust but also practical for smaller players.”
Some concerns persist, however. Smaller NBFCs worry that the 21-day consultation window may be insufficient for meaningful input, while others caution that the RRC’s success hinges on its ability to act independently without bureaucratic delays.
Challenges and Future Outlook
Implementing the RRC’s mandate will not be without hurdles. Coordinating phased reviews across diverse sectors like banking, payments, and forex without disrupting operations will require meticulous planning. Additionally, ensuring the AGR’s independence from industry lobbying will be critical to maintaining credibility.
The RRC’s first review cycle, slated to begin in Q1 2026, is expected to focus on high-priority areas such as digital lending guidelines, ESG (Environmental, Social, and Governance) disclosure norms, and cybersecurity frameworks for payment systems. The RBI has committed to publishing quarterly updates on the RRC’s progress, enhancing transparency.
This initiative dovetails with other RBI priorities for 2025, including a revamped financial inclusion strategy and improvements in grievance redressal mechanisms. As India grapples with inflationary pressures (projected at 4.8% for FY25) and global economic headwinds, the RRC could play a pivotal role in stabilizing the financial sector while fostering innovation.
Conclusion
The establishment of the Regulatory Review Cell marks a bold step by the RBI to future-proof India’s financial regulations. By institutionalizing periodic reviews and fostering collaboration with external stakeholders, the central bank is laying the groundwork for a resilient, inclusive, and innovative financial ecosystem. As the RRC begins operations on October 1, 2025, its ability to translate vision into actionable reforms will be closely watched by banks, fintechs, and investors alike, with the potential to redefine India’s financial regulatory landscape for years to come.
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