Replying to a question in Parliament about public sector banks writing off loans of corporates to the tune of Rs 2.4 lakh crore, the finance ministry stated it could not disclose whose loans had been written off. According to the reply, the central bank had told the ministry that Section 45E of the Reserve Bank of India Act, 1934 prevented the disclosure of defaulters’ names.
This contention is preposterous given the multiple banking scams currently rocking the country. It is also in violation of the Right to Information Act and the Supreme Court’s judgement in RBI v Jayantilal N Mistry, 2015.
Section 22 of the RTI Act states that notwithstanding anything inconsistent contained in any other law such as the RBI Act, the Banking Regulation Act or the Official Secrets Act, the transparency law shall override all others as far as access to information is concerned.
Yet, the Reserve Bank has stonewalled many RTI applications seeking information, including about defaulters. It challenged the Central Information Commission’s orders directing disclosure of such details, arguing that credit information submitted by various banks to it was confidential under Section 45E of the RBI Act. Further, under Section 45E(3), no court, tribunal or authority could compel it to give such information.
The central bank also cited section 8(1)(a) and 8(1)(d) of the RTI Act, which exempts it from disclosing information that could adversely impact the country’s economic interests or harm the competitive position of a third party, as well as section 8(1)(e), which relates to information held in a fiduciary capacity, as the grounds for denying information.
In its 2015 judgement, however, the Supreme Court wholly rejected these arguments and upheld the Central Information Commission’s orders directing the Reserve Bank to provide information, including names of loan defaulters. The court even pulled up the regulator for trying to cover up the misdeeds of banks:
“We have surmised that many Financial Institutions have resorted to such acts which are neither clean nor transparent. The RBI in association with them has been trying to cover up their acts from public scrutiny. It is the responsibility of the RBI to take rigid action against those Banks which have been practising disreputable business practices...From the past we have also come across financial institutions which have tried to defraud the public. These acts are neither in the best interests of the Country nor in the interests of citizens. To our surprise, the RBI as a Watch Dog should have been more dedicated towards disclosing information to the general public under the Right to Information Act.”
Rubbishing the contention that disclosing information about the performance of banks would threaten India’s economic interests, the apex court held that providing such information would in fact greatly serve public interest while suppressing it would be detrimental to the economy. Moreover, the court stated, economic interests were a part of larger national interest and included the economic empowerment of citizens by making such information available to them.
“The baseless and unsubstantiated argument of the RBI that the disclosure would hurt the economic interest of the country is totally misconceived. In the impugned order, the CIC has given several reasons to state why the disclosure of the information sought by the Respondents would hugely serve public interest, and non-disclosure would be significantly detrimental to public interest and not in the economic interest of India. RBI’s argument that if people, who are sovereign, are made aware of the irregularities being committed by the banks then the country’s economic security would be endangered, is not only absurd but is equally misconceived and baseless.”
In fact, the court ruled that information collected by the Reserve Bank even from private banks – as part of its statutory responsibility to inspect and regulate the banking sector – could be accessed under the RTI Act.
The slew of recent scams has again brought into focus the widespread systemic failures related to transparency and accountability in the banking system, and emphasised the need for greater public scrutiny. But public oversight is possible only if citizens are empowered with information, as the Supreme Court observed:
“The free flow of information about affairs of Government paves way for debate in public policy and fosters accountability in Government. It creates a condition for ‘open governance’ which is a foundation of democracy.”
Public sector banks are burdened with huge non-performing assets that threaten the very viability of the banking sector. In a democracy, do people not have a right to know how public money is being used to write off non-performing assets resulting from non-repayment of loans by some of the biggest corporate houses in the country?
By keeping the names of loan defaulters under wraps, the Indian government, including the Reserve Bank, is preventing any effective public scrutiny of the banking sector.
Anjali Bhardwaj and Amrita Johri are RTI activists associated with Satark Nagrik Sangathan.