The Supreme Court on September 30, 2022 expressed reservations with its own judgment of 2015 in re Jayantilal N Mistry, asking banks to make public under the Right to Information Act (RTI) the details of bank borrowers’ defaults and the inspection reports on such cases. The Apex court came to this conclusion in favour of reappraisal in the light of the right to privacy carved out as a fundamental right by a nine-judge bench in the K S Puttaswamy case, popularly known as the Aadhaar case subsequently, in 2017. The top court accordingly decided to examine the plea by banks against RBI circulars issued for disclosure of details, under the RTI Act, in accordance with the 2015 judgement as they were in hindsight at loggerheads with the right to privacy.
"The only remedy available to the petitioners (a clutch of banks) would be to approach this court by way of writ petition under Article 32 of the Constitution for protection of the fundamental rights of their customers, who are citizens of India", the Apex Court went on to observe. Banks are likely to lap this up with alacrity.
The private banks led by HDFC further argued that the RTI Act does not apply to private entities like them as they are not public authorities under the Act and therefore, information pertaining to such banks/FIs and their customers and employees cannot be sought/provided under the RTI Act, let alone confidential/sensitive information of such banks/FIs.
RTI and right to privacy are antithetical to each other but in a country where banks are grappling with the vexing problem of non-performing assets (NPAs), naming and shaming may be required. The Ahmedabad Municipal Corporation not long ago claimed remarkable success with its prescription consisting in going to town with loud announcement of names of defaulters of municipal tax to the accompaniment of drumbeats to draw the attention of neighbours to defaulters.
It is estimated that as much as 13% of the loan amounts of public sector banks are locked up in NPAs, an euphemism for bad debts. The late Arun Jaitley, former Finance Minister, once quipped that tax avoidance cannot be anybody’s birthright. The same applies to bank loans, with borrowers quite often intent on non-repayment but keen on diversion of funds through the labyrinthine money-laundering practice of multi-layering that ultimately results in funds vanishing into distant tax havens with banking secrecy laws thrown in and where the writ of the Indian government doesn’t run.
It is not only naming and shaming but that enormous stakes that taxpayers of this country have in PSBs — especially given the periodic fresh infusion of capital by the government with taxpayers’ money after chopping off the deadwood i.e., capital wiped out by write-offs done to clean up their balance sheets — that gives legitimacy to heightened public interest in bank affairs. So, banks owe taxpayers an explanation as to what brought them to this sorry pass, who took them for a ride and for how much. That defaulters are repeat offenders, often in cahoots with bank officials through the despicable evergreening route, makes a very strong case for not glorifying them with a touch-me-not status.
The Supreme Court it is respectfully submitted has opened the proverbial Pandora’s box of not can of worms by taking up cudgels for the defaulters. And how? By asking banks to take up cudgels on behalf of defaulters. This is strange to say the least. Can banks who have vital stakes in recovery of loans be seen pleading for the rights of defaulters who have shortchanged them? Doesn’t it boil down to worst conflict of interest, nay abdication of duties?
India after all does not have an explicit banking secrecy law a la Switzerland. Right to privacy like right to freedom, of which it is a subset, is available to law-abiding citizens. Can a convict sentenced to life cite right to freedom and clamour for immediate release without serving his term? Likewise, the right to privacy and banking secrecy is available only for those who operate within the four corners of law. Do the likes of Vijay Mallya and Nirav Modi have the right to be left alone and smirk at the banks and taxpayers, their brazen defaults brushed under the carpet?
The Government in September 2017 froze some 2 lakh banks accounts of suspected shell companies harbouring loot from money-laundering. Surely the nation has the right to know who are the people holding the nation’s progress to ransom. India, it bears repetition, is not Switzerland with constitutional guarantee of banking secrecy, and pride in numbered accounts that give anonymity to sundry crooks and despots who have bilked their nations of their resources through devious means and deposited the ill-gotten money in its banks.
Private banks may not be exactly bankrolled by taxpayers’ money but they should be answerable to their public shareholders. It is disingenuous for the private sector to claim greater immunity from disclosure on the ground that they do not depend on Government handouts as in the case of PSBs. Private banks may claim immunity from RTI but cannot fob off its own shareholders.
To be sure, fiduciary relationship underpins bank-customer dealings, but that argument cannot be stretched to put a lid on financial or white-collar crimes. Not in a nation which has been in the receiving end of Swiss intransigence in not exposing crooks hiding behind its fabled banking secrecy laws. The Supreme Court did well to carve out the fundamental right to privacy from the broader fundamental right to freedom. It is respectfully urged and prayed that it not carve out yet another right — this one being right to banking secrecy.
The writer is a freelance columnist for various publications and writes on economics, business, legal, and taxation issues