Right to Information
Banks must disclose daily business mix to citizens under RTI, rules CIC
In a powerful verdict, a Divisional Bench of Central Information Commissioners, Sharat Sabharwal and Sudhir Bhargava ordered Union Bank of India (UBI) to pro-actively disclose its mix business on a quarterly basis. The Bench at the Central Information Commission (CIC) also observed that daily disclosure of its business mix, is not exempted from the Right to Information (RTI) Act and therefore should be provided to a citizen who seeks it through this route. 
 
The order dated 28 June 2016, states “…that disclosure of the information concerning the daily business mix of a bank does not attract the exemptions from disclosure available under Sections 8 (1) (a) and (d) of the RTI Act and is in larger public interest. At the same time, we are of the view that such information regarding daily business mix should be given to an RTI applicant only in respect of a quarter, the business figures for which have already been made public in keeping with the statutory requirements. This would ensure that even as the information of daily business mix is made public for a particular period through the RTI route, the public also has before it the figures for the end of the quarter, put out by the bank in fulfilment of its statutory obligations.”
 
It is interesting to note that it took three years from the time of RTI application in 2013 to the final CIC decision in 2016, exposing the pendency issue. 
 
The RTI application:
 
On 16 May 2013, Thane-based Nanik Rajwani had filed the RTI application with Central Public Information Officer (CPIO) of Union Bank of India on the backdrop of irregularities performed by banks. In the RTI application he sought information on…
 
a) Details business mix of the bank for the months March and April 2013. (Daily figures of total deposits, total advances and total business mix).  
b) Details of Restructured accounts which have subsequently turned NPA during three year period commencing from 1 April 2011 to 31 March 2013. 
c) Details of action initiated by the bank against Bank Officials who have indulged in window¬dressing of the business mix parameters in past three years.
d) Details of action initiated against Bank officials for classification of accounts as Standard subsequently classified into non-performing asset (NPA) by statutory / Reserve Bank of India (RBI) auditors.
e) Details of action initiated against bank Officials/ Statutory   Auditors classification of accounts as Standard subsequently classified into NPA by RBI Auditors.
 
CPIO denies information claiming it will affect “economic interest”
 
The CPIO on 26 June 2013 denied the information stating that it would affect the economic interest of the bank. He denied information as follows:
"(a) of the application, stated that the information was exempted from disclosure under Section 8 (1) (a) of the RTI Act, since its disclosure would prejudicially affect the economic interest of the Respondent Bank, which is a ‘State’ within the meaning of article 12 of the Constitution of India.” 
He claimed exemption from disclosure of information on point (a) under Section 8 (1) (d) also. 
The information on point (b) was provided, but with regard to points (c) to (e), the CPIO responded that the information sought was not available because it was not held in the form requested and required analysis of data for compilation.
 
First Appellate Authority (FAA) denies information claiming “commercial confidence”
 
In his order on 31 August 2013, the FAA stated that the available information had been provided and added that the information regarding details of the business mix of the bank, sought at point (a), was a matter of commercial confidence under Section 8 (1) (d) and its disclosure would prejudicially affect the economic interest of the bank, which is a ‘State’ within the meaning of article 12 of the Constitution of India.  
 
Division bench hearing on 13 June 2016
 
The RTI applicant, Nanik Rajwani argued as follows:
  • His request is three years old and he is yet to get the information
  • In his view, the information sought would reveal how the actions of the bank are prejudicially affecting the interests of its shareholders. He added that the bank sanctions credit facilities, which remain un-utilised. On the last day of the quarter the un-utilised credit is disbursed to the borrowers and the amount so generated is transferred to their deposit accounts, thereby artificially enhancing both the advances and the deposits of the bank for the purpose of disclosure to public
  • The bank is not furnishing the information of daily business mix because they are apprehensive that it would reveal irregularities committed by them
  • They have computerised data of the daily business mix of the bank and therefore it can be easily disclosed. 
  • The Head Office of the bank does not have to compile such data by getting it from different branches, but gets it from its Regional Offices
  • Price of the shares of the bank is 50% below the market value because the market does not trust the business data put out by the bank. Therefore, disclosure of the information sought by him is also a matter of larger public interest because the shareholders of the bank would come to know the correct picture
  • As peer RBI circulars, the bank has to report its business mix to the RBI on a fortnightly basis and in the event of their not doing so, they are liable to be penalised
  • The bank does not take action against the officers indulging in window-dressing. No action is taken against those officers and statutory auditors, who classify certain loan accounts as standard even though subsequently the same have to be classified as NPA
  • The information concerning the action taken by bank against officers was denied to him because he did not write the RTI application in the correct format.
 
The Union Bank argued:
  • That, they are a commercial bank listed with SEBI, with shareholding of the government and public. SEBI requires them to publish their business figures at specified intervals and this is being done as per the statutory requirements. Disclosure of the daily business mix figures would have an adverse impact not only the Union Bank but the entire banking industry.
  • Certain figures are reported by the bank to the RBI in keeping with their regulatory requirements in the context of cash reserve ratio etc. but these are not required to be made public. Since Union Bank is a government bank, the disclosure of the daily mix figures, would hurt the interest of the bank, would also affect adversely the national interest.
  • Revelation   of   daily   business   mix   could   lead to comparisons with the business of other banks and result in a run on the bank. In case, the entire banking industry is required to put out the business mix figures on a daily basis, they would be willing to so do so. However, they would not wish to be singled out by being made to disclose daily figures in response to RTI applications.
  • The lower prices of their shares are because of the overall situation of the economy and not on account of the public not trusting the figures put out by them 
  
The division bench of CIC observed:
  • Comparison of the figures for a particular quarter with those of previous quarters could have the same adverse impact on the image of the bank that they claim would result from disclosure of the daily figures
  • The bank is in any case abiding by the statutory regulations to make public its business mix figures on a quarterly basis. There is no reason to believe that disclosure of daily figures in response to an RTI application would make the situation any worse for them
  • It could not be the case of the bank that they would wish to retain the confidence of public and their shareholders by hiding certain information
  • On the contrary, it can be argued that disclosure of such information would enable citizens and shareholders to make informed decisions about their dealings with the bank
  • As per Section 42 (2) of the Reserve Bank of India Act, every scheduled bank has to send to the RBI, on a fortnightly basis, a return containing the amount of its demand and time liabilities, the amount of its borrowings from banks in India, the total amount of legal tender notes and coins held by it in India, the balance held by it at the Bank in India, the balance held by it in other banks, the investment in central and state government securities, the amount of amount of advances in India and the inland bills purchased and discounted in India
  • On the basis of the returns received from scheduled banks, the RTI makes public, on a fortnightly basis, consolidated figures in respect of business of all scheduled commercial banks, concerning liabilities to the banking system, liabilities to others, borrowings from Reserve Bank, cash in hand and a balance with Reserve Bank, assets with the banking system, investments and bank credit
  • The information put out also covers variations over the previous fortnight, previous financial years; as well as comparison on a year to year basis. If publication of such consolidated information in respect of all the scheduled banks in the country does not hurt the economic interests of the State, there is no reason why disclosure of the daily business mix of Union Bank should end up doing so.
  • Any action that results in dissuading commercial entities from indulging in practices such as window-dressing would be in larger public interest.
  • Disclosure of information concerning the daily business mix of bank would be a worthwhile step in the above context
 
 
The Supreme Court in judgment dated 16 December 2015 in Reserve Bank of India vs. Jayantilal N. Mistry (the Court was considering certain cases involving requests for information concerning reports of inspections of banks conducted by RBI, irregularities committed by banks, details of loan defaulters and NPA accounts etc.):- "61. The baseless and unsubstantiated argument of the RBI that the disclosure would hurt the economic interest of the country is totally misconceived. In the impugned order, the CIC has given several reasons to state why the disclosure of the information sought by the respondents would hugely serve public interest, and nondisclosure would be significantly detrimental to public interest and not in the economic interest of India. RBI's argument that if people, who are sovereign, are made aware of the irregularities being committed by the banks then the country's economic security would be endangered, is not only absurd but is equally misconceived and baseless. 65. And in this case the RBI and the Banks have sidestepped the General public's demand to give the requisite information on the pretext of "Fiduciary relationship" and "Economic Interest". This attitude of the RBI will only attract more suspicion and disbelief in them. RBI as a regulatory authority should work to make the Banks accountable to their actions."
 
 
CIC Decision
  • The disclosure of the information concerning the daily business mix of a bank does not attract the exemptions from disclosure under Section 8 (1) (a) and (d) of the RTI Act and is in larger public interest
  • At the same time, we are of the view that such information regarding daily business should be given to an RTI applicant only in respect of a quarter, the business figure for which have already been made public in keeping with statutory requirements
  • This would ensure that even as the information of daily business mix is made public for a particular period through the RTI route, the public also has before it the figures for the end of the quarter, put out by the bank in fulfilment of the statutory obligations.
  • Accordingly, the CPIO of the Respondent Bank is directed to provide to the Appellant the information in response to point (a) of his RTI application dated 16 May 2013. This information should be provided, free of charge, within thirty days of the receipt of this order.
 
(Vinita Deshmukh is consulting editor of Moneylife, an RTI activist and convener of the Pune Metro Jagruti Abhiyaan. She is the recipient of prestigious awards like the Statesman Award for Rural Reporting which she won twice in 1998 and 2005 and the Chameli Devi Jain award for outstanding media person for her investigation series on Dow Chemicals. She co-authored the book “To The Last Bullet - The Inspiring Story of A Braveheart - Ashok Kamte” with Vinita Kamte and is the author of “The Mighty Fall”.)
 

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COMMENTS

Venkatasubramanian Pasupathy

7 months ago

I think indian banks follow branch banking system and window dressing is not done by all the branches there are checks to find this quarterly data on important parameters should be sufficient

What are the pitfalls of GST? An open letter by MD of Tally
India moved a major step closer towards a unified goods and services tax (GST) regime across the country, with the Rajya Sabha passing the relevant Constitution amendment Bill, which is touted as the most radical indirect tax reform since independence. However, people in the accounting business have voiced certain concerns that may impact businesses, especially small businesses.
 
In an open letter, Bharat Goenka, Managing Director of Tally Solutions Pvt Ltd, has pointed out one major lacuna. He says, "The most critical cause of failure of GST will be in the transference of responsibility and liability of tax remittance to the customers of a supplier (Section 16(11)( c)). Basically, the law postulates that if a particular supplier has failed to comply with the law correctly – by furnishing the correct returns (Section 27(3)) and/or making the correct payment (Section 27(2))  – then its’ customers cannot avail the input credit, and if given, it will be reversed. The problem is not the ‘management of a manifest risk’ – the problem is the side-effects of cash flow, improper accounting, and reduced ability for people to trade with new suppliers and new customers – since there is uncertainty about the business outcome."
 
Tally is one of the most used accounting software by businesses across India.
 
"With the framing of this law, the Government hopes that the market will self-weed out the bad eggs – the process of which is not wrong in theory.  What is wrong is not in understanding the cascading consequences of doing this in practice – and the mayhem it will create.  While the effort for driving compliance will reduce, the consequential effect of businesses shutting down, and therefore collections going down, have not been treated seriously enough," he added.
 
Here is what he says in the letter...
 
What exactly is the problem?
 
Let us understand this by visualising a scenario.
 
Assume Business A operates on a retained margin in the range of 8-9%. 
 
Because it is (say) an SME, it buys without access to good credit terms. So, it has purchased goods worth Rs50,000, and with GST of 20%, it has paid Rs60,000 for the invoice.  It now sells this at Rs55,000, with an applicable GST of Rs11,000 – so raises an invoice of Rs66,000 on Business B.
 
Business B is a distributor, operating on a margin of (say) 2%.
 
Now, Business B is concerned that the input credit of Rs11,000 may or may not available to it, in case Business A is negligent in its compliance.  Therefore, it refuses to pay the GST amount UNTIL it can be certain to get the input credit (which is an entire ‘return’ cycle away). So, it pays only Rs55,000 on an invoice valued Rs66,000.
 
Business A, in order to ‘get’ the balance due of Rs11,000, has to first finish all compliance requirements, including payment of Tax, when it has not yet ‘collected’ the Tax amount! In contrast, if Business B ‘trusts’ Business A and DOES pay the Rs11,000 – and if, for whatsoever reason (negligence, cash difficulties, mal-intent), Business A fails to complete the compliance, Business B will lose not just Rs11,000, but in effect, the ‘margin’ it makes on 10 other such invoices (since it operates on a thin margin of 2%)!
 
Critically, this is not just an ‘invoice to invoice’ problem.  Business A probably supplies to 20-30 people, and each of its customers will not have access to input credit due to any negligence of Business A!
 
Apart from this, there are going to be enough collateral problems.  For example, when the input credit is denied, will this be formally treated as a ‘business expense’ and not be taxed by Income Tax?  Obviously yes!  But at what point do I treat this as ‘contingent expense’?  Will my advance tax payments made on the assumption of ‘possible write back’ be accepted?  If not, will I be reimbursed for the cash-flow cost I incurred?  How do I report my end-of-quarter and end-of-year?  Will banks fund me?  Will insurance cover this risk?  How much more working capital will I require?  Will I be eligible for it?
 
When the input credit is uncertain and outside one’s span of control, the correspondent questions, which will arise – and correspondent litigations can only be imagined.  The last two-three questions will kill a large number of businesses (SMEs, Distributors, Stockists, Industrial Retail, Commodity traders – who either work on wafer-thin margins, and/or with inadequate cash).
 
The reasoning of the Government is: people are today colluding (albeit in small percentages) to fraudulently take input credit when it is not due. Therefore, it is only fair to put this risk back on the citizen. It also reasons that because this is a small percentage, which will keep declining due to self-correction by citizens, it is not a ‘great burden’ – that is, the ‘business risk’ is small enough to be manageable.
 
Is there a solution?
 
Of course. One of the greatest benefits of GST is that it is built ground up as a technology-enabled-tax-system.
 
In the past, it was not feasible for the Government to systematically mitigate the risk of fraud, since there was no practical human ability to keep track and trace the culprits – who could/would repeatedly create phantom organizations, and/or phantom invoices.  Against this history, it is no wonder that the Government wants to control this menace!
 
However, GST gives extraordinary traceability.  For one, it fully eliminates the ability to have phantom invoices. That alone, will massively reduce the problem. Secondly, with the near ubiquity of Aadhaar and the passage of the Aadhaar Bill, the Government MUST mandate that all GST registrations are traceable to individuals based on their Aadhaar identity.  Now, the ability to repeatedly create phantom organizations which allow credit to be taken without correspondent payment will rapidly evaporate. And, of course, the sheer traceability of the individuals, and strong public actions showcased for deterrence, will NOW become effective.
 
"While Tally has been working to ensure that the right software is available to all of you to simplify and manage your business when GST comes, it will obviously not help to solve this basic problem created by the law itself," Mr Goenka concluded.
 

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COMMENTS

Cma S S Chug

7 months ago

I do not think there is any pitfall in the system. I am explaining my poit in detail here.
The procedure for making payment of CGST and SGST and furnishing
information relating to transactions of both purchases from and sales to
registered dealers in Form No. GST-I shall be as under:-
(a) Seller will open Nodal Bank website or approach GST facilitation centre
(which will provide Bank website access and also guide Seller) to submit
Form No.GST-I. The Nodal Bank would only serve as the payment
gateway to facilitate payment in any bank in which the dealer has an
internet banking account.
(b) Seller will enter his basic details such as his BIN, Name, Phone and email
(Financial year will be current year by default and can be changed, date
of deposit will be the current date) on Form No.GST-I.
(c) In case the number of Invoices for sale to registered dealers and
purchases from registered dealers is less than 10, the Seller shall enter
the details of such individual invoices online (Invoice number, date of
the invoice, BIN of the registered purchaser or seller and amount of
GST collected or paid for the Invoice). If the number of invoices for sale
or purchase to registered dealers is more than 10 , the seller can enter
these details offline and upload the file.
(d) The total of GST will be computed automatically and Seller can enter
additional details for Interest, penalty or other amounts as applicable.
The complete total will be calculated automatically and mentioned in
figures and words.
(e) Seller will have to submit this information for payment by direct debit
to his bank account (as per his selection on the Nodal Bank website) as
is the procedure for any e-payment.
(f) Nodal Bank will transmit ONLY the total GST amount information, along
with details of the Seller as per the challan information, to the bank for
debit to the Seller’s bank account. Nodal Bank will NOT transmit any
information about the Invoices to the bank.
(g) The Internet banking website of the bank will be opened automatically
and the Seller will have to enter his login and password relevant for
internet banking to access his bank account. Then the total GST amount
as per the challan will be debited to his account and credited to
Government account by the bank.
(h) The bank will confirm to Nodal Bank details of successful deposit of GST
amount to Government account.
(i) Nodal Bank, upon receipt of confirmation from bank of the GST payment
by Seller, would generate the Form No. GST-I, which can be printed out by
the Seller for his own record purposes.
(j) The Seller would issue an Invoice to the Buyer with details of the Invoice
Number and the GST amount for that Invoice. The Buyer can verify if the
GST amount has been credited to the Government by using the Seller BIN,
Invoice number, date of invoice and Invoice Amount to verify the
corresponding entry from the nodal bank website.
So purchaser can verify entry from nodal bank website.

CMA S S Chug

7 months ago

Similar problem exists even now with VAT in Maharashtra. If A does not pay the VAT collected from B, Sales Tax department promptly collects it from B causing loss to B for no fault of his.

Maharashtra twin bus tragedy: 3 bodies found
Rescuers on Thursday recovered three bodies, including that of the driver of one of the two state transport buses washed away in the Savitri river in Raigad district after a bridge collapse on Wednesday, officials said.
 
Two other bodies were of women who may have been travelling on one of the two buses or in some other private vehicle.
 
The three bodies were found shortly after the search operations for the missing buses and about 22 passengers was resumed at daybreak by the Indian Coast Guard, Indian Navy, NDRF, police and the fire-brigade. Local fishermen also joined the search.
 
Heavy rains continued to hamper the rescue operations and Savitri river remained a raging cauldron 36 hours after it swept away the bridge, built during the colonial rule more than seven decades ago.
 
The body of driver S.S. Kamble was found in the shallow Arabian Sea waters near Anjarle beach, about 75 km from the tragedy site near Mahad. He was driving the Jaigad-Mumbai bus service of the Maharashtra State Road Transport Corporation (MSRTC). 
 
The two women whose bodies were found have been identified as Sevanti Mirgal from Harihareshwar and Ranjana Vaze from Kemburli, both locations several kilometres downstream.
 
Since Wednesday, various agencies have been searching for the two missing buses and passengers by deploying at least five helicopters, Gemini boats, expert divers and scuba divers.
 
Local legislator Bharat Gogavale had informed reporters on Wednesday about the recovery of two unidentified bodies from a spot near the bridge collapse. Later the district authorities clarified they were from an unrelated incident.
 
Besides the two missing buses, attempts are on to locate five to six private vehicles that were reportedly washed away into the Arabian Sea, around 18 km from the bridge crash site.
 
The defence authorities have procured large magnets weighing around 300 kg for the underwater search in the muddy waters to detect and attract the metal vehicles.
 
Maharashtra Chief Minister Devendra Fadnavis, his ministers and Leader of Opposition Radhakrishna Vikhe-Patil airdashed to the tragedy site and met collector Sheetal Ugale and Superintendent of Police Suvez Haque to take stock of the situation.
 
The Jaigad-Mumbai service was driven by Kamble with V.K. Desai as conductor. The other ill-fated MSRTC bus was a Rajapur-Borivali (north Mumbai) service driven by E.S. Munde with P.B. Shirke as conductor. 
 
Both bus services were based at Chiplun Bus Depot in Ratnagiri.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

 

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