New Delhi, Sept. 17 -- There has been considerable discussion around enforcement actions taken by the Reserve Bank of India (RBI), including on the need for an appellate authority similar to the Securities Appellate Tribunal for decisions of the Securities and Exchange Board of India. But there has been relatively little debate about the why, what and how of enforcement, particularly the distinction between enforcement and supervisory action.

RBI's actions broadly take two forms: penal action by the Enforcement Department (EFD), which is placed in the public domain, and supervisory action, much of which remains confidential. Understanding this distinction is important to appreciate how RBI exercises its regulatory powers.

Enforcement ac...