Discussion on the recent RBI Notices For Disclosure and the Issues which the Bank are facing

By

Sakshi Shairwal

Sri Abhigna

Many prominent banks including the State Bank of India, Punjab National Bank, and Union Bank of India among others of the country, have moved the SC against the RTI notices filed by the Reserve Bank of India for disclosures. The issue surrounds the subject of challenging the notices issued by the RBI to these banks under Section 11(1) of the Right to Information Act as regards the inspection reports/ risk assessment reports for the years FY17-18 and FY18-19.

The banks primarily sought the recalling of the 2015 judgment in the case of Reserve Bank of India v. Jayantilal N. Mistry, which upheld that the RBI is obliged to disclose defaulters list, inspection reports, annual statements, etc., related to banks under the RTI Act. And on April 28, a bench led by Justice Rao refused to recall the aforementioned judgment, dismissing the banks’ applications. The bench further observed that the SC Rules did not comprise any provision for filing an application seeking a recall of a judgment. RBI is required to act with transparency and refrain from hiding information that might cause embarrassment to the banks while disclosing the information sought, held by the court. Consequently, the banks have filed separate writ petitions concerning this issue, contending that such a disclosure of sensitive financial information, in obeyance of the RTI, noticed by the RBI, would have a detrimental effect on their business causing a compromise of the confidentiality of depositors. The banks argue that these disclosures will endow their competitors with an undue advantage as they could be exploited. In addition, the banks asserted that privacy is a fundamental right, and therefore should not be violated by making clients’ information public.

Section 11 of the Right to Information Act:

The present section gives power to the Central Public Information Officer to seek information from a third party in RTI applications. Section 11(1) of the Act provides the procedure to access third party information wherein the appellant needs to request the third party’s consent after which the Central Public Information Officer (CPIO) will produce a written request to the 'third party and within a stipulated time period obtain their response. However, it is not the information bearer (third party) who holds the key to disclosure. The power, by the RTI Act, 2005, is vested in the public information officer who will then, either see a 'larger public interest or otherwise allow disclosure based on the merits of the case.

On receipt of the submissions of the third party, the Public Information Officer (PIO) shall keep the submissions in view and then decide whether the information sought shall be disclosed or not. If the PIO does not find any merit in the submissions of the third party, he shall disclose the information sought to the applicant. On the other hand, where the PIO decides that the information sought shall not be disclosed then the basis for denial of information must be in accordance with Sections 8 and 9 of the RTI Act only.

Reserve Bank of India v. Jayantilal N. Mistry (2015):

The case pertains to the release of annual inspection reports and other financial reports of individual banks under the RTI Act from the RBI. RTI activist, Jayantilal Mistry has fought the RBI's decision not to release these reports under the act. The Apex court in this case rejected the contentions raised by the RBI that it has been holding the information of banks in a fiduciary capacity, and therefore such information is exempted from being a part of disclosures, as per Section 8(1)(e) of the RTI Act. RBI is not under a legal duty to maximize the benefit of any public sector or private sector bank, and thus there is no relationship of ‘trust’ between them and it further has a statutory duty to uphold the interest of the public at large, the depositors, the country’s economy, and the banking sector, the court pronounced. The bench continued to hold that the RBI does not possess a fiduciary relationship with financial institutions, because the reports of the inspections, statements of the bank, and information related to the business obtained by the RBI are not under the pretense of confidence or trust. Information secured through a regulatory capacity or under the law cannot be interpreted as information held in a fiduciary capacity, the court propounded. While the Apex court had first requested the full report, it was later agreed that only the pertinent elements on bad debts, borrowers, and so on would be made public. Nonetheless, even such information can reveal a great deal about borrowers, according to the lenders, violating different client confidentiality clauses. The court chastised the RBI for attempting to keep the inspection reports confidential.

Presently, it can be observed that the court has sided with the above-mentioned adjudication and the apex court is scheduled to hear the challenges made by the banks on August 17.

Sources:

https://www.bloombergquint.com/law-and-policy/rbi-duty-bound-to-disclose-banks-inspection-reports-under-rti-supreme-court

https://www.business-standard.com/article/finance/banks-once-again-move-top-court-to-keep-inspection-reports-hidden-121071901318_1.html

https://www.livelaw.in/rti/supreme-court-dismisses-banks-application-recall-rbi-loan-defaulters-list-inspection-reports-rti-173283

https://www.livelaw.in/breaking-no-fiduciary-relationship-between-rbi-rbi-is-bound-to-disclose-information-under-the-rti-act-supreme-court/

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