Riyaz Ahmed Bhat
Recently Reserve Bank of India (RBI) while replying to an application made under Right to Information Act (RTI) has informed the information seeker that Bank wise information on frauds cannot be disclosed in terms of Sec.28 of Banks regulation Act 1949. The information had been sought by the information seeker with respect to frauds reported in case of individual private sector bank with number of accounts alongwith amount involved therein. Furthermore the information seeker had sought information of write offs, account wise, and by the bank which was reported to be not available by RBI. The invoking of this provision by RBI has raised certain questions on functioning of the RBI as a regulator supervising the Banking system in the country because recent observation by the Finance Ministry GOI, after the eruption of recent 11400 Crore scam, has passed the buck of failed supervision to RBI. In recent times the country has been facing a volley of enquiries after surfacing of high ticket frauds amounting to thousands of crores in the system regarding functioning of regulatory mechanism of financial system of the country. In most of the cases the accused like Lalit Modi, Vijay Mallya or Nira Modi have fled the country to evade the clutches of the law and Banks have been left high and dry. These episodes have shaken the confidence of masses in general and the depositors in particulars who feel terrified for security of their money kept with Banks to safeguard their future needs. These happenings are not only denting Image of Indian Banks but also is likely to affect their future business prospects hence the said stand of RBI taken in giving the information asked for by the information seeker needs to be looked afresh.
The approach of the RBI to disclose the information to the public has been well debated in the supreme court of India in 2015. The Apex Court, after clubbing of petitions of Delhi and Mumbai high courts wherein the orders of Chief Information Commissioner on the subject were challenged, settled the matter after hearing the arguments presented by The RBI and petitioners.
The summarized points of Supreme Court (SC) opinion are:
* The argument of RBI “it is in fiduciary relationship with financial institutions and information obtained by RBI are under pretext of confidence or trust” has been invented only to create an in terrorem effect.
* Again The RBI is supposed to uphold the public interest and not interest of individual banks.
* RBI has no legal duty to maximize the benefit of any public sector or private sector bank and thus there is no relationship of trust between RBI and individual banks.
* RBI has statutory duty to uphold the interests of the public at large, depositors, the country’s economy and banking sector.
* The RBI ought to act with transparency and not hide information that might embarrass individual banks.
The SC heavily came upon argument of RBI that “making people aware of irregularities being committed by The Banks the country’s economic security would be endangered” terming it absurd. It further observed that banks are trying to cover up their underhand actions which are neither transparent nor clean and RBI in association with them has been trying to cover up their acts from public scrutiny. The SC also reminded the RBI its responsibility of taking a rigid action against those banks which have been practicing the disreputable business practices.
Delving deep into these observations it becomes clear that RBI has tried to present its role beyond being a regulator of industry and understood itself being a partner of business with individual financial institutions. This perception of RBI stands totally negated by The SC and in terms of SC opinion now it has little powers to hold any information from an information seeker. Going through contents of an earlier judgment the SC has held that” right to information in a democracy is recognized all throughout and is a natural right flowing from the concept of democracy…..” and by this logic RBI is an extension of governance structure of state to regulate an important sector of economy hence accountable before citizenry like other arms of governance system. However at this stage the stand taken by RBI is not only contrary to the stated position of law but also gives an impression to the citizenry of the country that there is more to hide rather than to reveal in Indian Banks. Though a number of times various voices have emerged regarding failure of governance structure of the banks with regard to increasing frauds and accumulation of bad and stressed assets demanding transparency of the systems in banking industry so as public accountability can be enforced yet a concrete plan is found still wanting to confront the challenges posed by these problems. Though the conceiving of legislating of RTI was intended to bring in the transparency in the corridors shrouded in the veil of opacity yet the regulator institutions like RBI still feel uncomfortable to disclose the information which would embarrass the individual financial institutions for which it is the regulator. Such an attitude is also compounded by the fact that as a regulatory authority the RBI has been going soft against erring financial institutions which have been caught on wrong foot in case of
* Doing wrong NPA classification as detected by RBI while having Asset Quality Review which included PSBs like SBI and Private sector Banks like Axis , hdfc and ICICI.
* Flouting KYC norms as detected during RBI inspections while opening relationships
* Not handing over the investigations to outside agencies after detection of frauds, declared by RBI, in big ticket financing
* Not Reporting progress of internal investigations of declared frauds to Registrar of Companies as mandated by companies Act.
This has encouraged the affluent sections of bank borrowers to get major concessions from governing syndicate of individual banks to clear their gold plated projects for financing or to get their debts restructured without having any valid reasons or to have concession on debt waiver on their borrowing in most non transparent way thus circumventing any kind of public scrutiny.
Concluding the discussion it emerges that though RTI has been derived from freedom of expression an important ingredient to practice participatory democracy yet there are several corridors of governance system which refuse to evolve to the system of open governance. The Banking regulator RBI is a perfect example of this process which is caught between web of safeguarding interest of individual financial institutions and sections of citizenry like general public, depositors or investors. However for all of us It is necessary to understand that any kind of contract between two individual parties involving public interest at large cannot claim to be a part of confidential business relationship because its tremors of failure or success has an impact on citizenry. That aspect of banking transactions whether public or private makes them to be liable for public scrutiny.
(The author is Secretary General Jammu and Kashmir Bank Officers Forum)
feedbackexcelsior@gmail .com
Follow our WhatsApp channel