RBI vs RTI

The RBI's approach to the question of dealing with the RTI Act does not adequately reflect the various provisions of the law

For the Reserve Bank of India (RBI), the current month of April has not been very pleasant as far as its dealings with the Supreme Court (SC) go. Two orders by the apex court — one on April 2 and the other on April 26 — will make the RBI rethink how it should go about its business of regulating the banks. 

The SC’s order on April 2 quashed the RBI’s circular issued on February 12, 2018, that among other things had framed norms for banks to recognise even one-day defaults by borrowers and take necessary action for insolvency resolution under the Insolvency and Bankruptcy Code. It was a setback for the central bank’s drive against resolution of stressed assets. 

The RBI is now busy suitably revising the circular to address the concerns expressed by the SC. Understandably, the central bank’s top management will be a little worried over how the apex court will view its revised circular and what precautions it must take to prevent incurring any further adverse comments from the apex court. It also remains to be seen how a new circular, as and when it gets issued, is viewed by borrowers and whether that too is challenged before a court of law. 

The apex court’s order on April 26 is embarrassing for the RBI. The SC held the central bank in contempt of court, but gave it a final chance to provide information pertaining to the annual inspection reports (AIR) on banks under the Right To Information (RTI) Act and withdraw its disclosure policy related to AIRs. The RBI had argued before the SC that the AIR information sought was exempted under Section 8 (1) (d) and (e) of the RTI Act and that it was violative of its own non-disclosure policy. It seems the apex court has held that these clauses for exemption do not apply to the information that was sought by the petitioners under the RTI Act. 

What went wrong? First, the RBI’s belief that it could seek refuge under its own disclosure policy was misplaced and not backed by the prevailing law. It is true that Sections 45 E and 45 NB of the RBI Act permit the central bank not to share information on a bank’s credit and other specified transactions to anybody.

But then the RTI Act has a far bigger scope and applicability. Section 22 of the RTI Act overrides Sections 45 E and 45 NB of the RBI Act. It says: “The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in the Official Secrets Act, 1923, and any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.” In retrospect, it does appear that the RBI was a little imprudent to have cited its disclosure policy in defence of its decision to deny information under the RTI Act. Section 22 of the RTI Act gives it an overriding effect on all other laws. 

The larger question is why the apex court was of the view that disclosing AIR information should not be treated as “information including commercial confidence” or as “information available in a fiduciary relationship”, revealing which could harm the competitive position of a third party and which are normally exempted from the purview of the RTI Act. A related question is whether the RBI ever considered redacting relevant portions of information in these AIRs that could violate the norms of commercial confidence and fiduciary relationship and then release the rest. 

Finally, it is still not clear if the public interest angle was explored by the RBI. The RTI Act stipulates that information that undermines commercial confidence or fiduciary relationship could still be shared under one condition that is, when a competent authority determines that larger public interest warrants the disclosure of such information. The competent authority, which can take such decisions, includes the President or the Governor of a state, Speaker of the Lok Sabha or the state legislature, the Chief Justice of India or the chief justice of a high court and the administrator of a union territory.

It would appear that the RBI’s approach to the question of dealing with the RTI Act has not been adequately informed by the various provisions of the law. If Section 22 of the RTI Act overrides everything else, why cite its disclosure policy as a defence? And if some of the information sought under the RTI Act can undermine commercial confidence or fiduciary relationship, why not use the legally available provisions of redacting what could be problematic? By adopting an inflexible position before the apex court, the RBI may have unintentionally created problems for banks and the confidentiality of their commercially sensitive information.