Banks Challenge RBI Notices, Supreme Court Order on Sharing Inspection Reports under RTI
Moneylife Digital Team 01 July 2021
When it comes to sharing information under the Right to Information (RTI) Act, not only the Reserve Bank of India (RBI) but even banks are approaching and challenging orders issued by the Supreme Court in the apex court itself. Add to this, the central information commission (CIC) that is also issuing stay orders, a power which has not been bestowed on the CIC by the RTI Act as passed by the Parliament. Overall, it appears that from banks to RBI to CIC, everybody wants inspection reports of banks to remain hidden from public view.
Four lenders, HDFC Bank Ltd, Axis Bank Ltd, ICICI Bank Ltd and Yes Bank Ltd had filed a writ petition in the SC challenging notices issued by RBI under Section 11 of the RTI Act. 
On 31 May 2021, the central public information officer (CPIO) of RBI told Mumbai-based RTI activist Girish Mittal, "As regards the inspection reports/ risk assessment reports for the years FY17-18 and FY18-19, we have issued notice under section 11(1) of the RTI Act to the bank/company concerned. On receipt of reply from the bank/company, further communication will be made."
While Section 11 is not a rejection, it is, however, incorrect in these cases. Section 11 of the Act works under the assumption that the information, which RBI holds regarding these banks and financial institutions (FIs) under fiduciary capacity, is a third-party information and, hence, the public authority (RBI in this case) must seek the permission of the third parties involved before disclosing the information.
Mr Mittal and Shailesh Gandhi, former central information commissioner (CIC), had filed appeals before the first appellate authority (FAA) of RBI when they could not receive copies of the banks’ inspection reports from the central bank. The FAA directed the CPIO to share copies of the bank inspection reports with the appellants. However, the banks immediately filed their second appeals before the CIC. 
Despite being parties in these cases, both Mr Gandhi and Mr Mittal came to know that the central information commissioner Suresh Chandra had issued stay orders on the FAA orders. 
Mr Mittal, in his letter to the CIC, alleges that "Most of these stay orders are given in the out of turn appeal hearings, without giving an opportunity to all the parties to appear. There are more than 20 such orders staying the information to be provided to the applicants."
Requesting recall of the stay order issued by the information commissioner, Mr Gandhi, in a letter to the chief information commissioner, says, "...the issue has been dealt with comprehensively by the Supreme Court and the information has been held to be disclosable. I would also like to point out that the power to stay any order has not been given to the Commission in the RTI Act by the Parliament. Thus, the stay to the disclosure of information is contrary to the directions of the Supreme Court and disrespect for the clear decision of the apex court for transparency. It is also an exercise without the sanction of the RTI Act and hence must be withdrawn."
“Parliament has not exempted ‘confidential’ information and the Commission’s action is in gross violation of the Supreme Court order and erroneous. I must mention that the Supreme Court has not stayed its order and has specifically refused an application for review of the said judgment. I must point out that the order was not related to the facts of the case but laid down the law with a clear ratio decidendi. The stay order (from CIC) effectively nullifies the Supreme Court’s order and is bad in law,” the former central information commissioner says.
According to Mr Mittal, earlier too, the banks had filed miscellaneous applications before the apex court which were dismissed as not maintainable on 28 April 2021.
He also pointed out that CPIO of RBI has not followed Section 11(1) in the true spirit. "Also, notices under Section 11(1) were issued by RBI to banks only on 31 May 2021, while the Act demands that the notice should be issued within five days from receiving the application," he says. Mr Mittal had filed his RTI on 1 May 2021 and received reply from the CPIO on 31 May 2021.
Further, Section 11 is only a procedure which requires the PIO to inform the third party of his intention to disclose the information if the information was received in confidence.
Banks have filed a petition before the SC against the notices issued by RBI under Section 11 of the RTI Act. Interestingly, apart from banks many interlocutory applications (IAs) are being filed in the case. Even Mr Mittal, through senior advocate Prashant Bhushan, had filed an IA in the case.
According to Mr Mittal, during the hearing on 28 June 2021, banks through their counsel tried to obtain a stay. However, the apex court adjourned the matter till 19 July 2021.
In the Reserve Bank of India vs Jayantilal N Mistry case, the Supreme Court had said, "In the instant case, the RBI does not place itself in a fiduciary relationship with the financial institutions (though, in words it puts itself to be in that position) because, the reports of the inspections, statements of the bank, information related to the business obtained by the RBI are not under the pretext of confidence or trust. In this case neither the RBI nor the banks act in the interest of each other. By attaching an additional 'fiduciary' label to the statutory duty, the regulatory authorities have intentionally or unintentionally created an in terrorem (serving or intended to threaten or intimidate) effect.”
“Furthermore, the RTI Act under Section 2(f) clearly provides that the inspection reports, documents etc. fall under the purview of 'Information', which is obtained by the public authority (RBI) from a private body,” the apex court observed. 
In the judgement, the SC had conclusively stated that, “As in this case, the RBI is liable to provide information regarding the inspection report and other documents to the general public.”
However, it appears that neither banks nor the regulator is interested in letting common citizens know details about bank inspection reports. 
Earlier, when RBI did share inspection reports, many things became public knowledge. Moneylife has already published a few articles bringing out the gaps in the management of some of the banks (Read: Finally, RBI Shares Inspection Reports of SBI, ICICI Bank, Axis Bank and HDFC Bank under RTI). These articles are a great eye-opener for the public to appreciate the actual substance below the surface and the festering issues like poor governance, risk management, and lethargy in going after the bad loan recoveries. This explains why there is an all-around effort to keep bank inspection reports hidden. 
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11 months ago
I was Chief Inspector of the SBI once. I fully know what the Report contains. It mostly contains a detailed inquiry into the functioning of the branch that also includes use of discretionary powers. The Inspector or Chief Inspector is at liberty to address a D.O letter to the Managing Director on aspects that are of critical nature or that require an immediate action by the management, which in the normal course of review of inspection report might take longer time. It is not necessary for an outside agency to claim a right to view this Inspection Report. What it can however ask is the Executive Summary of the Report and the Action taken report. This third party view by parties who are neither bankers nor those who know banking but who should be knowing what impacts banking is making on the lives of citizens. Corrections to systems can be suggested by the nature of complaints made to the Ombudsman, by public complaints and by own experiences across the counter
The whole objective is to bring correction to a system otherwise refusing to address the customer need.
However, there is nothing wrong in sharing the details of errant borrowers as depositors have a right to know where and how the money is sunk?
Kamal Garg
Replied to yerramr comment 11 months ago
Kamal Garg
11 months ago
I think every commercial entity (which a banks is also) has rights to protect its vital information and data from the public.
Public should be concerned with the information and data which is required by them and not become over enthusiastic in collecting such data. No other country has a law like the RTI Act which we have got.
We must understand the consequences of such over zealous acts of us.
11 months ago
If it is a personal money of the bank chairman it is personal business not to share but when public money is involved u having every right to be transparent. it is not taking fat bonuses in the office and kick back outdoors dirty idiots. It will be nice if the courts direct all the list of willful defaulters above 5 crores onwards.
11 months ago
How come they can challenge the order under article 32 of the constitution ? The Supreme court should not entertain the petition at the outset and should dismiss it in limine. If the banks want to challenge then they had to approach the high court under article 226, and it is doubtful if the high court will find it fit to entertain the petition !
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