Is RBI protecting big bank defaulters; wilful offenders must be exposed

The Supreme Court’s epoch making judgement directing the Reserve Bank of India to disclose the list of 'wilful' bank defaulters and annual inspection reports could not have come at a better time when Indian banks are overburdened with gross non-performing assets of around ₹10 trillion and the entire country is concerned about the deteriorating health of the banking system. A substantial portion of these NPAs is believed to be on account of a small-number big 'wilful' defaulters.

The apex court’s directive came as a big relief to the public who have long been demanding in vain with both the government and RBI for the disclosure of the list of ‘wilful’ bank defaulters. Even parliament questions on the subject produced little positive response.

The government and RBI took shelters behind the secrecy laws. The Supreme Court bench, comprising Justice Nageswara Rao and Justice MR Shah, delivered the Judgment in a contempt petition filed by RTI activist Subhash Chandra Agrawal against RBI alleging wilful disobedience to the specific directions issued earlier by the court in the RBI Vs Jayantilal N Mistry and others case.

All these years, big time financial criminals managed to hide under the government and RBI shelters to protect themselves from public exposure. The right to information on those who get their identity protected after wilfully squandering public funds was denied.

Gains from big-time financial crime far exceed pains of punishment while the cases of small-time white-collar criminals are often disposed quickly, and offenders get exemplary punishment. The investigative system against big-time financial offenders is often riddled with corruption and inefficiencies. Also, the process kowtows to political pressure, making it an ineffective tool for the protection of victims.

Under the loan burden, industry and banks fall sick though few have heard of an owner of a large sick industry has ever fallen sick. The collusion between bank management and large defaulted borrowers could probably be best exemplified in the latest case involving a former ICICI top brass, her husband and Videocon promoters, in which the bank board tried its best to shield the chief executive until the last moment.

Indian depositors in both the banking and non-banking financial systems, including chit funds, have long been at the mercy of the promoters, the government and, often, an extraordinarily slow-moving judiciary.

Thus, the latest Supreme Court judgement comes as a big relief to the common man, who would now hopefully know the persons by name robbing them and their banks ‘wilfully.’ The bench directed RBI to withdraw the disclosure policy insofar as it contains exemptions which are contrary to the directions issued in the RBI versus Jayantilal N. Mistry Judgment. In the Jayantilal N Mistry case, the Supreme Court had held that RBI is bound to disclose information under the RTI Act.

The Supreme Court bench observed that the new policy, which replaces the disclosure policy dated November 30, 2016, directs various departments not to disclose information that was directed to be given by the judgment in Reserve Bank of India vs. Jayantilal N. Mistry case.

Thus, the RBI has committed contempt of court by exempting disclosure of such materials. However, the bench has given one last opportunity to RBI to comply with the Jayantilal N Mistry judgment and also warned the banking regulator that any further violations of SC's order will result in serious contempt of court proceedings.

The judgement said: "We could have taken a serious view of the Respondents continuing to violate the directions issued by this Court, we give them a last opportunity to withdraw the disclosure policy insofar as it contains exemptions which are contrary to the directions issued by this Court.

The Respondents are duty-bound to furnish all information relating to inspection reports and other material apart from the material that was exempted in para 77 of the judgment. Any further violation shall be viewed seriously by this Court."

The petition moved through advocates Prashant Bhushan and Pranav Sachdeva said RBI issued a 'disclosure policy' directing its Public Information Officers (PIOs) not to disclose virtually all information, even the kind of information directed to be disclosed by the Supreme Court.

"The said policy states how RBI headquarter has decided not to disclose information with regards to applications received under the Right to Information Act 2005, in clear violation of the judgment of this Hon'ble Court," the petition stated.

The country’s central bank had earlier refused to disclose such information on the grounds of economic interest and holding such information in fiduciary relationship with these individual banks. The Supreme Court rejected the grounds for denial of information as baseless and directed the RBI to disclose information sought by the RTI applicant in that case.

It was held that the RBI was not in fiduciary relation with these individual banks, as it did not hold such information in 'trust' with such banks. Further, withholding rather than disclosing of such information would be detrimental to the economic interest of the nation, it held.

The judgement has been rightly hailed by the All India Bank Officers’ Confederation (AIBOC). It wants RBI to critically review its disclosure policy from time to time, especially the ones pertaining to regulatory and supervisory activities. AIBOC has made this demand as it feels there is every possibility that banks may prevent the flow of information in this critical area.

Soumya Datta, AIBOC general secretary, said: “corporate wilful defaulters are the primary cause for today’s humongous stressed assets in banks, especially in public sector banks.” Despite the hue and cry, the government and RBI have not put in place a suitable frame of law or regulations to check this menace. This has affected the health of banks, allowing economic offenders and wilful defaulters the opportunity to fleece banks and leave the country cocking a snook at the authorities. It is high time RBI and the government expose such wilful defaulters.