Citizens' Issues
Public Activism: Relentless Crusader

Dogged campaigns by Pune-based activist Vijay Kumbhar have made a tremendous impact, finds Vinita Deshmukh

The half-constructed multi-storeyed building on tony Prabhat Road (Pune) is a sore sight in a residential locality where luxurious condominiums have mushroomed in the past decade. Ironically, it also stands witness to the symbol of citizen power. It is an admirable example of how a...

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Inspection reports of co-operative banks should be made public by RBI, rules CIC

In a precedent setting judgement, the CIC asked for the audit and inspection report of a cooperative bank to be disclosed under the RTI Act, rejecting the central banks contention that the disclosure would lead to loss of faith in some banks and adversely affect economic interests of the state.

In order to safeguard the interests of depositors and ensure a strong banking system, the Reserve Bank of India (RBI) is required to conduct an inspection of banks at periodic intervals under Section 35 of the B R Act, 1949. Such inspections directly affect the consumer, as it is his or her money that is being handled or mishandled by the banks. Co-operative Banks, which fall under dual regulation of RBI and state government, are no exceptions under such inspection, ruled the Chief Information Commission (CIC).
Baroda-based Makarpura Industrial Estate Cooperative Bank Ltd came under the RBI's scanner when a city resident Jayantilal N Mistry filed an RTI application on 19 October 2010 with the Urban Banks Department of the apex bank. The queries asked were as follows:
1. Procedure, rules and regulations of inspection being carried out on cooperative banks
2. Last RBI investigation and audit report carried out by Mr Santosh Kumar during 23 April 2010 and 6 May 2010 and sent to Registrar of the Cooperatives of Gujarat, Gandhinagar on Makarpura Industrial Estate Cooperative Bank Ltd with Reg No. 2808.
3. Last 20 years inspection reports with the name of inspector for the above named bank and action taken report
4. Reports on all cooperative banks that have gone into liquidation and action taken against all directors and managers for recovery of public funds, powers utilized by RBI and analysis, and procedures adopted.
5. Names of remaining cooperative banks under your observation for irregularities and action taken reports
6. Period (of time) required to take actions and its implementation
The Public Information officer replied on November 18, 2010 stating that: "RBI is conducting inspections under section 35 of the BR Act, 1949 (AACS) at prescribed intervals but information sought is maintained by the bank in a fiduciary capacity and was obtained by RBI during the course of inspection of the bank and hence cannot be given to outsiders; disclosure of such information may harm the interest of the bank and banking systems.'' The PIO also stated that such information is also exempt from disclosure under Sections 8(1)(a) and (e) of the RTI Act.

Mr Mistry then filed an appeal with the First Appellate Authority (FAA). The FAA also turned down the request for information saying: "The RTI Act was enacted to secure access to information under the control of public authorities subject to the provisions of Sections 8 and 9 of the Act only. In the present matter, the PIO has provided all the available information to the Appellant''. It quoted some CIC orders to support PIO's decision in not providing the remaining information.
Dissatisfied with the FAA's decision, Mr Mistry filed Second Appeal with the Central Information Commissioner (CIC) Shailesh Gandhi in New Delhi. The hearing was conducted on 17 October 2011, with the applicant, Mr Mistry as well as the RBI PIO Mr Udgata going live via video conference from Vadodara and Mumbai respectively.
During the hearing Mr Udgata insisted that Mr Mistry's query seeking RBI's audit and inspection reports fell under the purview of Section 8 (1) (a) of the RTI Act. He explained that disclosure of irregularities could lead to loss of faith in some banks and this could affect the economic interests of the State. He contended that the full bench decision of the Commission in RR Patel vs RBI CIC/MA/A/2006/00406 and 00150 dated 07/12/2006 had accepted this contention of RBI.

Mr Gandhi, the CIC announced his decision on 1 November 2011. He said, "If there is any information available on record regarding names of cooperative banks observed to have indulged in irregularities and any action taken reports against them should be disclosed to Mr Mistry." The CIC also asked the PIO to provide him the 'period required to take actions and implementation'.
Mr Gandhi also ordered that "As regards last RBI investigation and audit report carried out by Mr Santosh Kumar during 23 April 2010 and 6 May 2010 and sent to Registrar of the Cooperatives of Gujarat, the last 20 years inspection report carried out with the name of inspector on the above named bank and action taken report and reports on all cooperative banks that have gone into liquidation should be provided to the RTI applicant.

The CIC did not accept PIO's and Appellate Authority's decision that it comes under Section 8 and so this information should be denied. The PIO had quoted Section 81(a) and (e) for denying information. These state that: "Information, disclosure of which would prejudicially affect the sovereignty and integrity of India, the security, strategic, scientific or economic interests of the State, relation with foreign State or lead to incitement of an offence; and; information available to a person in his fiduciary relationship, unless the competent authority is satisfied that the larger public interest warrants the disclosure of such information.''

Mr Gandhi in his order, tore apart the connotation of 'fiduciary relationship' in this case. He explained that "This Bench, in a number of decisions, has held that the traditional definition of a 'fiduciary' is a person who occupies a position of trust in relation to someone else, therefore requiring him to act for the latter's benefit within the scope of that relationship. In business or law, we generally mean someone who has specific duties, such as those that attend a particular profession or role, e.g. doctor, lawyer, financial analyst or trustee."

"Another important characteristic of such a relationship is that the information must be given by the holder of information who must have a choice- as when a litigant goes to a particular lawyer, a customer chooses a particular bank, or a patient goes to particular doctor. An equally important characteristic for the relationship to qualify as a fiduciary relationship is that the provider of information gives the information for using it for the benefit of the one who is providing the information."

"All relationships usually have an element of trust, but all of them cannot be classified as fiduciary. Information provided in discharge of a statutory requirement, or to obtain a job, or to get a license, cannot be considered to have been given in a fiduciary relationship.  In the present matter, information provided by banks/ institutions subordinate to the RBI is done in fulfillment of statutory compliance. This would not create any fiduciary relationship as such between RBI and the subordinate banks/ institutions. The criteria defining a fiduciary relationship, as described above, must be satisfied which does not appear to have been done in the present matter. The inspection, audit and investigation is done by RBI officers as part of a statutory duty and banks have to undergo this in compliance with statutory requirements. Therefore, the Respondent's contention that the information sought was exempt under Section 8(1)(e) of the RTI Act is rejected,'' the CIC said.

Mr Gandhi also dismissed PIO's contention that parting of this information could lead to a loss of faith in banks and banking systems and therefore comes under Section 8(1)(a) of the RTI Act. Mr Gandhi stated that the PIO was primarily depending on the decision of a full bench in R. R. Patel v. RBI CIC/MA/A/2006/00406 and 00150 dated 07/12/2006 which in short, had entitled the RBI to deny information as it would 'adversely affect the economic interests of the State. The RBI is an expert body appointed to over this matter and we may therefore rely on its assessment'. This decision was also taken on the basis of submissions of the Deputy Governor of RBI - one of his contentions amongst others being that, 'the inspection carried out by RBI often brings out weaknesses in the financial institutions, systems and management of the inspected entities. Therefore, disclosure can erode public confidence not only in the inspected entity but in the banking sector as well. This could trigger a ripple effect on the deposits of not only one bank to which the information pertains but others as well due to contagion effect'.

( for those interested in the summary of this case, pl click here to see the CIC decision of Shailesh Gandhi)

Shailesh Gandhi, in his decision quoted from Justice Mathew's clarion call in State of Uttar Pradesh v. Raj Narain (1975) 4 SCC 428 - said, "In a government of  responsibility like ours, where all the agents of the public must be responsible for their conduct, there can be but few secrets. The people of this country have a right to know every public act, everything that is done in a public way by their public functionaries. They are entitled to know the particulars of every public transaction in all its bearing. Their right to know, which is derived from the concept of freedom of speech, though not absolute, is a factor which should make one wary when secrecy is claimed for transactions which can at any rate have no repercussion on public security".
It is also worthwhile remembering the observations of the Supreme Court of India in SP Gupta vs President of India & Ors. AIR 1982 SC 149:  "It is axiomatic that every action of the government must be actuated by public interest but even so we find cases, though not many, where governmental action is taken not for public good but for personal gain or other extraneous considerations. Sometimes governmental action is influenced by political and other motivations and pressures…At times, there are also instances of misuse or abuse of authority on the part of the executive".
"This is the new democratic culture of an open society towards which every liberal democracy is evolving and our country should be no exception. The concept of an open government is the direct emanation from the right to know which seems to be implicit in the right of free speech and expression guaranteed under Article 19(1)(a). Therefore, disclosure of information in regard to the functioning of Government must be the rule and secrecy an exception justified only where the strictest requirement of public interest so demands...''

Mr Gandhi also quoted other court decisions and concluded by explaining Section 8 of the RTI Act as follows: "Having laid down the above, this Bench examines the contention of the PIO in the present matter that the information is protected by the exemption under Section 8(1)(a) of the RTI Act. Since I do not chose to defer to the RBI's judgment in this matter, I will evaluate whether the PIO's contention of exemption under Section 8 (1) (a) is tenable. Section 8 (1) (a) exempts information, disclosure of which would prejudicially affect the sovereignty and integrity of India, the security, strategic, scientific or economic interests of the State, relation with foreign State or lead to incitement of an offence".

"It is unlikely that disclosure would prejudicially affect the sovereignty and integrity of India, the security, strategic, scientific (or economic interests) of the State, relation with foreign State or lead to incitement of an offence". Hence I will examine whether the economic interests of the State are likely to be prejudicially affected by disclosure of the information. The information which has been claimed to be exempt under Section 8 (1) (a) is query 2, 3 and first part of query 4: "2. Last RBI investigation and audit report carried out by Mr. Santosh Kumar during 23/04/2010 to 06/05/2010 sent to Registrar of the co - operative of Gujarat, Gandhinagar on Makarpura Industrial Estate Cooperative Bank Ltd. Reg No. 2808. 3. Last 20 years inspection report carried out with the name of inspector on the above named bank and action taken report. 4. Reports on all cooperative banks that have gone into liquidation and action taken against all directors and managers for recovery of public funds, powers utilized by RBI and analysis, and procedures adopted."

"The PIO and the FAA claim that revealing the investigation and audit report of Makarpura Industrial Estate Cooperative Bank Ltd. in 2010 and the last twenty years would 'prejudicially affect the economic interests of the State'. This Bench is unable to understand how disclosing the investigation and audit report of Makarpura Industrial Estate Cooperative Bank Ltd. Reg. no. 2808 would in any miniscule way affect the economic interests of the Indian Nation. Hence there is no ground for refusing information with regard to query 2 and 3. Further, reports on all cooperative banks which have gone in liquidation sought in query 4, are also completely unlikely to affect the economic climate or interests of the Country. Declaring the audit, inspection and investigation reports of all cooperative banks which have gone into liquidation cannot do any further harm to such banks. If the banks have gone into liquidation, what more damage can come on them? The PIO perhaps rates the economic state of this Nation as being extremely fragile to make such a claim. I therefore cannot leave such a decision to the wisdom of RBI.

"I now refer to the conclusion and recommendation of the Full Bench of the Commission: The PIO is directed to provide the information as per records to the Appellant in relation to queries 2 to 6 before  30 November 2011,'' the CIC said in his order.

(Vinita Deshmukh is consulting editor of Moneylife. She is also an RTI activist and convener of the Pune Metro Jagruti Abhiyaan. She can be reached at

You may also want to read:

CIC says disclose inspection reports of apex cooperative banks as well



Anil Agashe

6 years ago

Oh yes absolutely a must. Many people may not read them but it is necessary. RBI's real fear is that their inaction will get publicised and they will be questioned. No bank becomes weak overnight.It takes time and in many instances it is the negligence on part of regulators is the cause.If action is initiated quickly some damage can be controlled.

Govind Gopal Shanbhag

6 years ago

Madam Vinita Jee - Your article is elaborate. But I was a senior officer of largest bank and was in audit for over a decade, I hv inspected one man branch in Lahul Spiti to largest branch in New York. Before retirement in January 2009 I was responsible for getting concurrent audit of largest banking branch of a bank (balance sheet size is more than 60 % of government/private sector banks. by inhouse/ CFAs. I hv attended number of audits done by various agencies including investigation audits (flow of funds to share market). I hv met number of auditors who are conducting balance sheet audit of co-operative banks and quality of auditors(audits) less said is better. RBI audit with various banks is generally data collection audit - they give a book let containing nearly 70-100 and banks are required to fill up these forms which are later published in their various magazines. There are only two qualitative audits in entire banking system (1) Central Office audit of branches conducted in State Bank branches - persons are coming from outside side who do thorough audit (2) Credit audit of large branches again by State Bank which is also too qualitative,. CFAs send article clerks with nil knowledge or half knowledge (which they say dangerous). And these firms if anything goes wrong are not accountable they generally take a declaration from the branch heads all information has been provided. All banks spend crores of rupees on statutory audit and all of us know how much purpose is served by this audit - but this is done as their lobby is very strong. Now coming to the point, even if the audit reports are made public and/or put in a web site who ensures auality ????????


Nagesh Kini

In Reply to Govind Gopal Shanbhag 6 years ago

1. We have the Maharashtra State Co-op. Bank where a large number of cooperative housing societies have not only parked their savings accounts but also crores of their sinking fund deposits. Money Life has carried detailed reports. Yet it is 'too big to fall'!

On the matter of Bank Statutory and Internal/Concurrent Audits, my experiences as a CA on the CAG/RBI empaneled statutory are equally identical.
The audit processes are archaic and need a serious rejig to make them more meaning full. The Q&A methods call for revamping - so much so the Long Form Audit Report required from Statutory Audits is termed "Lafda Audit Report." In stead of searching questions for identifying potential NPAs and window dressings they require a mass of statistics that the auditors simply ask the branch managements to fill in. This defeats the very purpose of the audit. The auditors are separately paid for this.

Defaulting industrialists list is already there buried on CIBIL site

The CIC through an order asked the RBI to publish list of top 100 defaulter industrialists. However, fearing backlash from judiciary, the central bank had handed over the job to publish list of defaulters against whom a suit has been filed to CIBIL

The Central Information Commission (CIC) has asked the Reserve Bank of India (RBI) to publish names and other details of top 100 industrialists of the country who have defaulted on loans from public sector banks. Central information commissioner Shailesh Gandhi told the apex bank to post complete information as part of suo-motu disclosure before December end on RBI's website.

Interestingly the RBI, till few years ago, used to publish the list on its site. However, following allegations of circumvention in the judiciary process and legislative supervision, the central bank handed over the task to Credit Information Bureau of India (CIBIL). RBI, in 2004 authorised the credit bureau to publish list of defaulters of Rs1 crore and above and provide details of wilful defaulters of Rs25 lakh and above, against whom suits have been filed.

CIBIL has been publishing the list of defaulters ( against whom a suit has been filed, however, for a common person it is a big task to dig out specific information. Also, there is more information available on the lenders than those of defaulters.

Last year, RBI issued a master circular with all its instructions and directions against defaulters. This was issued with a view of providing credit information of wilful defaulters to banks which would help the lenders in denying further loans.

Replying to a Right to Information (RTI) application filed by Panipat-based PP Kapoor, the central bank said making the information (about defaulters) public is in fiduciary capacity and disclosing it would adversely affect economic interest of the state. Mr Kapoor had sought to know from the RBI the details of default in loans taken from public sector banks by various industrialists besides list of defaulters, top 100 defaulters, name of the businessman, address, firm name, principal amount, and interest amount, date of default and date of availing loan.

The CIC Mr Gandhi, while admitting that the information is fiduciary in nature said that such exemption does not stand when there is a larger public interest in the disclosure. “This (disclosure) could lead to safeguarding the economic and moral interests of the nation. The commission is convinced that the benefits accruing to the economic and moral fibre of the country far outweigh any damage to the fiduciary relationship of bankers and their customers if the details of the top defaulters are disclosed,” he said.

The CIC also said that while the RBI is sharing the information with CIBIL, it is difficult to understand their reluctance to share the same information with citizens under the RTI.

“In fact, information about industrialists who are loan defaulters of the country may put pressure on such persons to pay their dues. This would have the impact of alerting citizens about those who are defaulting in payments and could also have some impact in shaming them,” Mr Gandhi said in his order.




6 years ago

RBI's intent seems to be to make it extremely difficult for anyone to get the information. The CIBIL site does not allow the whole picture to emerge easily esp of directors involved in different companies.



In Reply to Java 6 years ago

Using the link in the message below, you can search by director's name also, but agreed - it could have been much simpler.

Why is CanBank Factor such a major apparent loser in this business? And who are all these people who've managed to salt away thousands of crores - and no track of their companies . . .


6 years ago

Thank you for this, very interesting, and even deeper within the CIBIL website, you can search by name of Director or Company itself over here:-

Agreed, CIBIL could have made this more user friendly, but it is a good tool. Maybe a shortlist of those over 10000 lakhs (100 crores), for example, could be co-published?

As an example, outstanding in lakhs:-:-

Andhra Pradesh:-

NIPPY CHEMICALS 2,606,000.00



NIRU IMPEX 11,317.00





Uttar Pradesh:-



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