Must Know For Your Finances: RBI Sets Up Independent Advisory Group

The Reserve Bank of India (RBI) has recently established an independent Advisory Group on Regulation (AGR), bringing in outside experts to help channel industry feedback and oversight into the regulatory process. This move is part of strengthening the RBI’s Regulatory Review Cell (RRC), which ensures that regulations are reviewed systematically every few years. 

In this article, we discuss what the AGR is, how the RRC works, which regulations are likely to be impacted, what this means for banks, NBFCs, fintechs and other regulated entities, and how industry participants should respond.

Regulatory frameworks need periodic revision to keep pace with evolving markets, new technologies, shifting risks, and changing business models. Recognising this, on September 17, 2025, the RBI announced the creation of an independent Advisory Group on Regulation (AGR), which will feed into its existing Regulatory Review Cell (RRC). 

The goal is to institutionalise industry feedback, making regulation more adaptive, transparent, and responsive. The new group includes senior figures from banking, NBFCs, cooperative banks, life insurance, etc. This could herald more regular policy updates and bridge gaps between regulator intentions and industry realities.

What RBI Announced: AGR and RRC Mandate?

Here are the key features of the announcement:

• RBI has constituted the Advisory Group on Regulation (AGR), composed of external experts (industry practitioners, senior bank/NBFC executives). Some members named include Rana Ashutosh Kumar Singh (MD, SBI), T. T. Srinivasaraghavan (former MD & Non-Executive Director, Sundaram Finance), Gautam Thakur (Chairman, Saraswat Co-operative Bank), Shyam Srinivasan (former MD & CEO, Federal Bank), Ravi Duvvuru (former President & Chief Compliance Officer, Jana Small Finance Bank), and N. S. Kannan (former MD & CEO, ICICI Prudential Life).
   
• The advisory group will provide industry feedback on regulation. It is not making regulation itself, but advising, highlighting practical issues, unintended consequences, suggesting improvements.
   
• This feeds into the Regulatory Review Cell (RRC), which already is part of RBI’s Framework for Formulation of Regulations. The RRC’s mandate includes ensuring that all regulations issued by RBI undergo a comprehensive internal review every 5 to 7 years.
   

Why This Matters: Gaps & Challenges in Regulatory Review?

To appreciate the significance, it helps to understand what gaps this move may address:

• Lag in keeping regulations updated: Regulatory rules often lag behind market innovation, fintechs, digital banking, algorithmic risk, co-lending, etc. Having periodic reviews helps avoid outdated rules from persisting.
   
• Industry pain points / unintended consequences: Sometimes, regulation has side effects that hamper business or innovation, or impose high compliance costs. Having industry experts bring feedback means more grounded regulation.
   
• Transparency and consultation: Industry players often feel regulation is done “top-down”; this aims to add more institutional channels for feedback, possibly reducing friction and surprises.
   
• Regulatory quality & consistency: Regular review can help harmonise overlapping rules, correct gaps, remove redundant rules, ensure clearer drafting, and avoid regulatory burden creep.

How the AGR / RRC Mechanism Compares With Prior Regulatory Review Frameworks?

Here is a comparison between how the regulatory process functioned before vs what the AGR + RRC framework seeks to improve:
 

Implications for Banks, NBFCs, & Fintechs

The establishment of this advisory mechanism has multiple implications for regulated entities:

1. More Predictable Regulatory Landscape
   Entities can expect regulations to be reviewed periodically; stale or burdensome rules may get updated or removed. This helps in long-term planning.
    
2. Better Opportunity to Raise Practical Concerns
   For instance, if a regulation is costly to implement or has unintended side effects, industry players now have a more formal channel to propose change or request clarification.
    
3. Faster Regulatory Adjustments for Innovation
   Fintechs, digital platforms, emerging business models likely benefit if the AGR identifies areas needing new regulations or relaxations sooner.
    
4. Compliance Cost Management
   By flagging redundant or overlapping regulations, burden might be reduced; regulation may become more streamlined.
    
5. Regulatory Risk Awareness
   Entities need to stay alert: being proactive in providing feedback, tracking reviews, anticipating possible regulatory changes.
    
6. Greater Stakeholder Scrutiny & Capturing Diverse Perspectives
   AGR includes representation from cooperatives, small finance, etc. Inputs might bring to light issues faced by smaller / regional players, not just large banks.
    

What Kind of Regulation Changes Might Follow?

While the announcement does not specify which regulations will be reviewed immediately, likely candidates include:

• Rules related to fintech / digital lending: digital KYC, app-based lending, co-lending transparency etc.
   
• Payment aggregators / gateways: many regulatory changes in past year; likely further refinements in routing rules, merchant KYC, settlement timelines.
   
• Capital / liquidity / risk exposure norms for NBFCs / small finance banks / housing finance companies.
   
• Regulation of subscription models, data usage, privacy for financial apps.
   
• Possibly interest rate transparency, disclosure norms, fair practices code, especially for consumer finance.
   
• Rules that straddle sectors (banking / insurance / fintech) may also get harmonized.
   

What Industries / Stakeholders Should Do?

To benefit from or adapt to this change, entities should:

• Engage proactively: Submit feedback or position papers when invitation comes. If you are in fintech, NBFC, cooperative bank etc., ensure you have documented pain points.
   
• Audit existing compliance costs: Identify which regulations are onerous, costly, or outdated—prepare cases for simplification or exemptions.
   
• Track the 5-7 year review cycles: Know when regulations relevant to your operations are likely due for review; plan for regulatory risk accordingly.
   
• Improve internal reporting / data: Being able to show empirical evidence (cost burdens, default rates, compliance cost etc.) strengthens feedback.
   
• Monitor announcements from RBI / RRC: As soon as regulatory review concludes, be ready to adapt business plans, IT systems, disclosures etc.

Potential Challenges & Risks

While the AGR + enhanced RRC framework is promising, some potential difficulties:

• Speed vs thoroughness: Extensive reviews may delay regulation updates; balancing speed with quality will be key.
   
• Conflicts of interest: Industry members on AGR may have biases; managing that and ensuring public interest remains balanced is important.
   
• Diverse voices / smaller entities: Ensuring that small NBFCs, regional banks, cooperative banks, fintechs from tier-2/3 cities are heard, not just large players.
   
• Regulatory uncertainty during transition: As rules are under review, businesses may face uncertainty about what norms will look like in future; this could delay decisions or investments.
   
• Implementation of changes: Even after review, actual rule changes, regulatory instruments, enforcement may lag; RBI / other bodies will need to ensure that reviews lead to action.
   

Conclusion

The RBI’s move to form an independent Advisory Group on Regulation, feeding into its Regulatory Review Cell, represents a step toward more dynamic, inclusive, and responsive financial regulation in India. By mandating periodic reviews every 5-7 years and institutionalising external feedback, RBI is signalling an openness to refine regulation in light of real-world business, fintech, and consumer experiences.

For regulated institutions, banks, NBFCs, fintechs, and cooperatives—this could mean lighter regulatory burdens over time, clearer rules, and more predictability. But it also means stakeholders need to pay attention, prepare evidence, and participate actively in the process. The actual impact will depend on how transparently and effectively feedback is solicited, how promptly regulation is revised, and how well the revised norms balance innovation, risk, and protection.

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