Skip to main content

SC warns RBI for failing to disclose information under the RTI Act

The Supreme Court on Tuesday warned the Reserve Bank of India (RBI) of contempt proceedings for failing to disclose information regarding the annual inspection reports of banks sought under the Right to Information (RTI) Act. The top court gave the RBI one week’s time to comply with the directions or “be ready to face the consequences”. The matter will be next heard on April 2.
In January, the apex court had issued notice to the RBI on a contempt petition alleging the central bank had not provided information about the inspection conducted on some banks said to be involved in irregularities inside the Sahara Group. The petitioner alleged that the RBI had denied information regarding inspection reports for ICICI Bank, Axis Bank, HDFC Bank and State Bank of India (SBI) despite clear orders of the top court.
The RBI, however, had denied disclosing the information, claiming that the said inspection reports fell under the definition of 'fiduciary information' and  hence could not be put out in public domain. The information sought is from Annual Financial Inspection (AFI) Reports, which the RBI prepares as supervisor of banks.
In January 2015, the Supreme Court had in a judgment held that the RBI could not withhold information under the pretext of 'fiduciary relations' with banks. A two-judge bench of the then Justices M Y Eqbal and C Nagappan had then held that the banking sector regulator was supposed to “uphold public interest and not the interest of banks”. The RBI, the two-judge Bench had said, was thus “clearly not in any fiduciary relationship with any bank.” “The RBI has no legal duty to maximise the benefit of any public sector or private sector bank, and thus there is no relationship of ‘trust’ between them,” the top court had then said. It had then also observed that this behaviour of the banking sector regulator of denying information under RTI would “only attract more suspicion and disbelief in them”.
Later in February 2016, the top court had asked the RBI to give a list of companies which were in default of loans worth Rs 500 crore or more and whose loans had been restructured under the corporate debts restructuring scheme by the banks or financial institutions. RBI’s Annual Financial Inspection (AFI) focuses on statutorily mandated areas of solvency, liquidity and operational health of the bank. It covers areas like capital adequacy, asset quality, management, earning, liquidity and system and control.
With drive to clean-up bank balance sheets, RBI’s reports have identified some corporate stressed accounts and asked banks to treat them as Non-Performing Assets. Banks have had to make immediate provisions for them. AFI is part of banking regulator’s supervisory mandate with on-site inspection of banks on an annual basis. Besides the head office and controlling offices, certain specified branches are covered under inspection so as to ensure a minimum coverage of advances. The compliance to the inspection findings is followed up in the usual course. The top management of the RBI engages with bank managements highlighting concerns that need immediate rectification, and draw up an action plan, that can be monitored.
The Business Standard, 27th March 2019

Comments

Popular posts from this blog

SC order on RBI circular: More options for banks to tackle defaulting firms

Lenders also have the option of restructuring the loans Lenders to companies which are under stress could now have three options to deal with them if they default on loans: take a haircut as part of a one-time settlement, restructure the loans for a longer tenure as they did when corporate debt restructuring schemes were allowed, or go to the Insolvency and Bankruptcy Code (IBC) for redress. These changes in the options available to lenders come, according to PE funds and bank lawyers who are involved in the IBC process, in the wake of the Supreme Court on Tuesday setting aside the 12 February RBI circular, which allowed a 180-day window to banks to resolve a company default.But they can still find a resolution. According to a Reserve Bank of India circular, a loan becomes a non-performing asset when banks cannot find a way of recovering their money in 90 days. In short, banks still have a window to resolve the default. Lenders can take a haircut as part of a one -time settlement of du…

April GST collections at new high despite rate rationalisation in December

Goods and services tax (GST) collection touched a record high in April, exceeding Rs 1 trillion for the third time in four months. The mop-up was 10 per cent higher over the previous year. Gross collection for the month was Rs 1.13 trillion, said the finance ministry. Despite the recent rate rationalisation in December, a rise in collection was reported. Of the total collected, the CGST (central GST) contributed Rs 21,163 crore, the SGST (state GST) Rs 28,801 crore, the IGST (integrated GST) Rs 54,733 crore (including Rs 23,289 crore on import) and cess Rs 9,168 crore (including Rs 1,053 crore on import). After settlement of the IGST and the balance IGST in a 50:50 ratio between the Centre and states on a provisional basis, the CGST stood at Rs 47,533 crore and SGST at Rs 50,776 crore. The CGST target in the Union Budget for 2019-20 is Rs 6.1 trillion. “The April collection indicates the tax base is increasing gradually, with GST getting stabilised with measures such as e-way bills and…

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…