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Context:
- The Nirav Modi case, of bank fraud, has once again brought into focus the deficiencies in procedures and supervisory and regulatory controls in the banking sector.
Under the RTI
- In 2011-12, the Central Information Commission (CIC) considered appeals from applicants concerning bank regulatory functions after they had been denied information, under the Right to Information (RTI) Act, by the Reserve Bank of India (RBI) and the National Bank for Agriculture and Rural Development (NABARD) .
- The denial of information was on the ground that disclosure would prejudicially affect the economic interests of the state by causing loss of public faith in some banks.
Landmark judgment:
- These decisions by the CIC were considered and upheld by the Supreme Court on the basis of transfer petitions filed by the RBI and NABARD, in its landmark judgment in Reserve Bank of India v. Jayantilal N. Mistry and 10 other cases.
- The court ruled that the regulatory bodies were not in a fiduciary relationship with the banks that had provided the information to them and that by attaching a “fiduciary” label to the statutory duty, they had “intentionally or unintentionally created an in terrorism effect”.
- The Supreme Court also rejected the ground of information disclosure hurting the economic interest of the country.
Stop the opacity
- The CIC has also directed disclosure of information in respect of wilful defaulters and absconders.
- Overriding the ground of the fiduciary relationship of banks with their customers.
- Institutions that take the responsibility of managing public funds have to be answerable to the people.
- Transparency in the banking sector
- Legal provisions that prevent disclosure of full details of loans of willful defaulters and absconders need to be suitably modified.
