as i said earlier, communication dilemmas arise not just in the domain of monetary policy but also with respect to other dimensions of the reserve bank ’ s work. let me give you some illustrations from those. ( vi ) guidelines for new bank licences 30. as you know, there is a proposal to licence some new banks. the last time the reserve bank had formulated guidelines for bank licencing was way back in 2001 ; the world has changed a lot since then. we realized that the guidelines for bank licensing need to be revisited in the changed context. the broad issues in new bank licensing are by now quite familiar : the initial size of capital, the period to be allowed for capital dilution, conversion of nbfcs to banks or promotion of banks by nbfcs and the advisability of allowing corporates to start banks. on several of these issues, the world view has changed ; many heresies of the past have become orthodoxies today. 31. we were eager to evaluate our bank licencing guidelines in the light of later experience and to get broadbased feedback from all stakeholders. accordingly we decided to bis central bankers ’ speeches put out a discussion paper listing the pros and cons of each of the decision criteria. we were genuinely open minded and made deliberate effort to communicate our “ open mindedness ”. most media and a majority of the analysts had thought we came across quite well on that count. but a small segment said that we had betrayed our “ biases ” causing some consternation within the reserve bank. it is not clear whether we had fallen short in our communication effort or whether our interlocutors were superimposing their own prejudices in evaluating us. regardless, there is a lesson here for us to improve our communication. ( vii ) basel iii – getting the message across 32. as many of you know, the g - 20, at its seoul meeting in november 2010, endorsed the basel iii package for bank regulation and supervision. at the heart of basel iii are efforts to fortify the banking system, correct the incentive framework and ensure its long term stability. we, in india, are in the process of evaluating the impact of basel iii on indian banks and i have spoken about that at length elsewhere 1. basel iii poses several challenges including communication challenges. let me illustrate two of the important ones. 33. first, central to basel iii is the idea that banks should build up capital and provisioning buffers during good times

was to arrest the deterioration in the external accounts. buffering up the reserves, restricting gold imports, tightening domestic liquidity to push up market interest rates – much has been written about the 2013 defence of the economy, and visceral memories of that turmoil remain. but, it was a time for soul searching – something rather basic was broke and needed to be fixed. the pledge of good governance and macroeconomic management to the people had taken a body blow and had to be re - built. early on, it was clear that a fundamental change was due, something that would shake up the system and unsettle the ruling orthodoxy, something that would require an amendment to the rbi act. accordingly, starting in 2014, the rbi embarked upon building stone by stone – though not necessarily in chronological order – the institutional plinth for a new monetary policy framework. in september 2013, an expert committee to revise and strengthen the monetary policy framework was set up. the expert committee ’ s recommendations provided the intellectual edifice on which the new framework would rest. it was an internally consistent model, complete in itself, ranging from the goal ( s ) of monetary policy ; the instrument rule that would guide the 3 / 8 bis central bankers'speeches policy maker ’ s pursuit of the goal ; the operating procedure ; the transmission ; and the international dimensions of monetary policy. it drew heavily on work accumulated before it and broke new ground as well. the consumer price index, the official metric for gauging inflation, struck a chord with households and consumers by capturing price changes at the retail level, unlike the wpi which is closer to a producer price index or at least, it reflects wholesale price changes and tells households about inflation measured before it reaches them. moreover, the wpi was until january 2012 a weekly index comprising 676 items. price relatives were not always available or collected and often they were just repeated1. all this was easier said than done. the public had for long been used to the rbi articulating inflation concerns in terms of the wpi under a multiple indicator based monetary policy framework. in january 2015, a new all india consumer price index had been constructed with 2012 as its base. the problem for the rbi was, however, that it had never reacted to cpi inflation before. consequently, the responsiveness of cpi inflation to policy impulses was unknown. there was no way to calibrate policy actions. the anointment of headline cpi inflation as the official measure of inflation was