There used to be a time when it was impossible to get even a squeak out of the Reserve Bank of India (RBI). Then came the 1991 reforms which, over the next two decades, were largely focused on the financial sector.
It slowly dawned upon the RBI that it needed to improve its communication skills and methods because now a third player, the financial markets, had to be informed as well, not just the Finance Ministry.
So the RBI put its head to it and gradually communication improved by going beyond those dreary circulars it used to put out. Everyone was happy because simultaneously the RBI became more and more transparent. Its digital output of data and reports and speeches by its senior officials has been prodigious.
Communication deficit
But of late there appears to have been a dilution in the quality of communication. Over the last few years people who follow such things have often been left wondering about the whys and hows when just a few lines of explanation would have been sufficient to make the communication complete.
Consider, for example, the RBI’s response to the suggestion in a newspaper report that a few thousand crore of ₹500 notes were “missing”. This was inferred from a RTI enquiry.
The RBI was quick to deny this but its explanation was incomplete because it didn’t say just why the RTI answer had been misinterpreted. The RBI needed to explain how. Two lines would have sufficed.
Another example is the decision to allow banks to restart lending to wilful and other defaulters. The Congress was quick to attack the RBI. This could have been avoided if the RBI explained why the decision had been taken.
Exactly the same thing happened when, a few years ago, the RBI decided to not let online stores save credit card numbers. It was a decision made to protect the cardholders but the failure to explain left lakhs of people very angry.
Likewise, even though it was a Finance Ministry decision to impose a 20 per cent advance but refundable tax on credit card transactions made abroad, the RBI should have been ready with an explanation. It wasn’t.
Demonetisation debacle
But these things pale into insignificance when compared to the RBI’s inadequacies in communications during the months that followed demonetisation. It was a total shambles which doesn’t bear recounting.
This is not all. It has now become standard RBI practice not to respond to queries from the media. It simply refuses even to clarify. This is how things used to be before 1991.
For all the vehement denials of government intervention in the RBI, the central bank’s reticence is wholly reminiscent of how the government of India approaches its communication and data dissemination — less is more.
This is not the only way RBI’s communication strategy mirrors the government’s. With the government, routine communication is done promptly and with adequate detail. It’s the non-routine communication that’s the problem. This applies to the RBI as well. So, following every Monetary Policy Meeting, you’ll get the minutes of the meeting describing each member’s arguments, even if they dissented. Every speech given by senior officials of the RBI are transcribed and the text promptly made public.
It would be most helpful to consumers of financial information if the RBI were to review its communications policies.