Balancing regulatory approaches

The use of both principle- and rule-based approaches in regulatory frameworks has its challenges, but the latter may be problematic for tech-driven activities

The debate over whether regulators should follow a principle-based or rule-based approach (PBA or RBA) in framing regulations is never-ending. The discussion about the “ease of doing business” is often interrelated to this issue. Maintaining a proper balance between the two approaches is tricky and requires substantial regulatory expertise.
 

The PBA involves providing broad guiding factors in regulations while giving flexibility to regulated entities to work out operational nitty-gritty. As against this, the RBA is prescriptive, listing out possible scenarios and detailing specific penal consequences for violations.
 

On the face of it, the PBA appears to be a better option.