Central banks must always be careful in their communication to avoid any inconsistency between what they say and what is understood and interpreted by the markets and stakeholders, according to M Rajeshwar Rao, Deputy Governor, Reserve Bank of India.

“Everyone tries to dissect and parse each and every word, probably looking at the synonyms and semantics in search of the meaning which was not conveyed or intended in what they speak. Any difference in perception between the two could have unintended consequences or dilute the impact of policy actions,” said Rao in his recent address at the School of Management Studies; Cochin University of Science and Technology.

The Deputy Governor observed that effective communication is like a good recipe — one has to get all ingredients in the right proportion to make it palatable.

“Most of the times, communication for a central bank — and you all will agree with me on this — is bit of a tight rope walk in the face of strong cross winds,” he said.

Rao noted that communication with all stakeholders, including members of the public, is an important strategic tool in furthering public policy objectives and mandates for the Reserve Bank.

Public understanding can help ease the way for reforms, as well as increase support for policies, he added.

“The ever-changing modes of communication are also keeping us on our toes, so much so that often it seems that we are chasing a moving target.With the advent of social media, the communication is instantaneously consumed, assimilated, and commented, all within few seconds and in few hundred words.

As far as central banks are concerned, Rao emphasised that there is no one-size-fits-all solution for communication.

“For serious policy issues and monetary policy, it is important that the context, rationale and setting of decision making is placed before the audience to enable them to appreciate the outcome.

public awareness

For public awareness on topical issues, we have a 360-degree media approach to reach out to as many people as possible in the language they understand,” said Rao.

The Deputy Governor underscored that communication is a vehicle for the financial services industry for raising awareness, shaping expectations, promoting financial education, and financial inclusion.

However, the expanding sphere of entities and people who consume our communications presents both – a challenge and opportunity.

“Opportunity as it helps in achieving our mandates effectively. Challenge as reaching out to this diverse set of end-users with differing level of financial awareness puts our methods to test.

“Communication is a very powerful tool to set the right expectations during turbulent times and in tempering expectations right during the periods of exuberance,” Rao said.

The Deputy Governor said it is imperative that the top echelon of an entity focuses on both effective communication by individual employees and appropriate corporate communication by the institution  by undertaking appropriate training and sensitisation of front-line staff and by putting in place an appropriate enterprisewide communication strategy which conforms to its core values and ideology.

“Effective communication by individual employees can win customers, and the appropriate corporate communication by the institution can enhance its public image and brand value,” he said.


Rao emphasised that it is imperative that the financial institutions and their employees have the capacity to not only deliver on the expected service levels continuously, but also have the capacity to adapt to both foreseen and unforeseen challenges.

In current times, building the capacity of employees and continuous upgradation of their skills is not an option but a necessity, he added.