Despite SC orders, why is the RBI stonewalling RTI queries on defaulters?

Is it not the duty of the RBI to secure public interest by checking defects in banks to prevent financial scandals and corruption in public and private banks?
Despite SC orders, why is the RBI stonewalling RTI queries on defaulters?
Despite SC orders, why is the RBI stonewalling RTI queries on defaulters?

Any public body cannot hide its skeletons in opaque cupboards. The apex court gave a final warning to the RBI to stop its habitual denial of information, which should be mandatorily disclosed under RTI provisions and RBI norms. The Supreme Court in a recent judgement (April 26, 2019 in the Girish Mittal case) generously let the RBI free from penalties for contempt of court but sufficiently warned the body to change its policy.

Is it not the duty of a banking regulatory body like the RBI to secure public interest by checking defects in banks to prevent financial scandals and corruption in public and private banks? It has no scope for hiding under ‘commercial confidence’ because the law demands it to give more information to the public in the public interest. Non-performing assets are the result of non-performing banks. The RBI must ensure the public of the proper performance of financial institutions.

RBI’s anti-RTI attitude made information seekers run from pillar to post, which include filing application to PIO, first appeal in RBI, second appeal to Central Information Commission (CIC), High Courts and Supreme Court. The final order of the apex court in 2015 in the Jayantilal Mistry case rejected all of RBI’s contentions. The transparency champions thought that with this the fight for information was won and over. Yet, the RBI continued to refuse RTI applications with the same defences and made citizens repeat the entire cycle. While individual citizens must spend their own money in countering RBI’s litigations, the RBI spends public money.

Various applicants sought different kinds of information from the RBI. Kapoor asked for details of defaulters of loans, including names of top 100 defaulters with details. In an affidavit before the Orissa High Court, the RBI said that market to market (MTM) losses because of currency derivatives was to the tune of Rs 32,000 crore.

Jayantilal Mistry wanted the RBI investigation and audit report on the Makarpura Industrial Estate Co-operative Bank Ltd of Gujarat along with the action taken report. Some other applicants sought similar reports of other banks. Subhash Chandra Agrawal wanted to know the RBI file notings on fines imposed on some other banks. Patil sought copies of complaints to the RBI against illegal working of some banks and violations of Standing Orders of the RBI, etc. The RBI resisted disclosure despite CIC directions.

All the cases landed in the Supreme Court, which, in 2015, upheld the orders of disclosure by former Central Information Commissioner Shailesh Gandhi in a landmark victory for transparency. The RBI announced a disclosure policy saying it cannot provide information on 26 areas, including for the classes of information directed by Supreme Court. The RBI also continued to refuse to give inspection reports, defaulter lists, penalty notes, audit reports, etc., on grounds rejected by the Supreme Court. The RBI clearly propagated a double-tongued policy – publicising the names of farmers who could not repay loans compelling them to end their lives, and guarding the names of defaulters, despite the Supreme Court’s clear instructions. Under these circumstances, this author as the Central Information Commissioner had to issue a show cause notice to the RBI Governor considering him as ‘deemed PIO’, to impose penalty for this kind of defiance.

Finally, the SC concluded, again, on April 26 that the RBI was bound to disclose and directed it to withdraw its disclosure (aka non-disclosure) policy, which is in breach of the 2015 SC judgement. “Any further violation shall be viewed seriously,” warned the bench comprising Justices L Nageswara Rao and MR Shah, saying that the central bank could face contempt proceedings if it failed to furnish the information.

The court had held that the RBI is accountable to the public and cannot withhold information under the defence of ‘trust’ with the financial institutions. Former deputy governor of the RBI, R Gandhi, saw problems in disclosing bank inspection reports, which are comprehensive assessments of a bank as an entity, saying if something is taken out of context it could be a ‘danger’. Currently, the annual inspection is based on a Risk-Based Supervision method which focuses on “evaluating both present and future risks, identifying incipient problems and facilitates prompt intervention/early corrective action”. It covers financial position, functioning of the board and various links of the bank, details of assets and liabilities, treasury management, asset liability management, liquidity operations, para banking activities, etc. But the RBI must see the overriding public interest in giving information rather than stonewalling demands. It should break colonial mental blocks of refusing access for better financial governance of the banking industry.

The ‘rule of secrecy with disclosure as exception’ no longer exists because it was reversed in 2005 to ‘disclosure as a rule with exception of privilege’. To keep secrets could be a royal privilege of the British era. The regulatory, being a ‘state’, has no more immunities, rather it would be liable for losses caused by its negligence, if any. The ‘King can do no wrong’ days have gone, and the RBI is not a king. The state and state instrumentalities like the RBI should not abdicate their legitimate duties and drag citizens to court for fighting for their rights. These bodies together became the biggest litigants besides being the sole cause of litigation in around 60% of the 3 crore pending cases.

While dealing with specific requests for information about a bank’s inspection report, the RTI Act gives an opportunity to deny, after due examination of needs to protect the interest of other bank as per Section 8. Access law provided to redact non-disclosable information and provide the rest. The RBI cannot refuse disclosure en bloc. It cannot ignore the huge public interest in transparency, which could have prevented several bank scandals involving private and public banks and prevented thousands of defaulters fleeing causing huge loss to banks.

What is of great concern is that after the SC Division Bench reserved orders in the contempt case, the RBI had the audacity to post its latest ‘disclosure policy’ on April 12, directing its departments to ‘withhold information’ that was expressly ordered to be shared by the 2015 SC order. The RBI’s intransigence and repeated failure to honour the SC’s order undermines the very rule of law it seeks to enforce as a regulator. Such a policy also does not bode well for the nation in terms of economic interests. It also amounts to protecting defaulters and financial scamsters.

Despite noticing the RBI’s wilful defiance, the apex court was very kind to it in contempt cases, but if the RBI does not withdraw its anti-transparency policy again, it might face the ire of the people and courts. The RBI should explain why it wants to screen big loan defaulters and banks that breach norms.

M Sridhar Acharyulu is a former Central Information Commissioner and Professor of Constitutional Law at Bennett University.

Views expressed are the author’s own.

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