RBI and other Indian authorities should look at enhancing public communication on macroprudential policies, global body FSB said today as it emphasised that such a strategy can be a “soft tool” to convey intended messages to market participants.
Releasing its peer review report of India, the Financial Stability Board (FSB) said the authorities should consider enhancing public communication on macroprudential policies.
There are reasons for keeping some information related to financial stability confidential since its publication may cause adverse market reaction, but in general “a public communication strategy can represent a soft tool for macroprudential purposes that conveys the intended messages to financial market participants”, it said.
The global body, which has entities from 24 countries and jurisdictions, stressed that additional work needs to be done by India to put in place a comprehensive macroprudential policy framework.
On ways to bolster public communication, FSB said there can be “more detailed press releases of the outcome of FSDC/FSDC-SC (Financial Stability Development Council – Sub Committee) meetings and greater use of the FSR to explain macroprudential policy decisions”.
Besides, authorities should consider issuing a comprehensive periodic report or summary on the FSDC’s activities.
Enhanced public communication on macroprudential policies can also introduce more accountability and educate the public on financial stability issues, it added.
Noting that the current channels of communication on financial stability have varying degrees of transparency, FSB said assessment of risks in the FSR (Financial Stability Report) is quite extensive.
“Senior RBI officials sometimes give speeches on financial stability issues. Changes in the RBI’s tools for macroprudential purposes are disclosed on the RBI website and in an annual publication, but focus mainly on the change itself rather than the policy context and its implications (if any) in the macroprudential stance,” the report said.
As per the report, there is only a limited integration in the FSR between the discussion on risks and policy actions that have been taken or are being considered.
“There is no comprehensive periodic report on activities or decisions of the FSDC while communication of the FSDC/FSDC-SC meetings on the MoF (Ministry of Finance)/RBI websites tends to be brief and often does not describe judgements considered or decisions made,” it added.