Before the RBI-Supreme Court standoff over the disclosure of names of wilful defaulters leads to a full-scale constitutional crisis, there is need for both to reconsider their respective positions. On the face of it, both have merit and public weal on their side. Neither is swayed by extraneous factors.
Yet, a via- media needs to be found. Otherwise, the collision of two well-meaning but contrary positions can blow into a huge and avoidable constitutional crisis. Last week, a two-member bench of the apex court headed by Justice L Nageswara Rao gave the central bank what it called “a last opportunity” to withdraw its November 2016 disclosure policy which seeks to deny information under the Right to Information Act regarding the names of big bank defaulters.
The court asked the RBI to change its disclosure policy in order to honour the RTI order seeking for the names of willful defaulters to be made public. The Supreme Court order came while hearing contempt petitions against the RBI which had failed to comply with its earlier order in 2015 which had rejected the RBI case against such disclosures.
The central bank had withheld the names of the defaulters on grounds of economic interest, commercial confidence, fiduciary relationship and/or public interest. The court rejected these grounds, saying that the RBI had a statutory duty to uphold the interests of the public at large, the depositors, the economy and the banking sector.
The RBI should act in a transparent manner, the order said, and not hide information that might embarrass individual banks or defaulters. The origins of the case lie in the order of the Central Information Commission which had asked the RBI to disclose the names of willful defaulters of Rs 50 crore and above as also the action taken against them. Controversial central information commissioner Sridhar Acharylu using street-side rhetoric said while the banks go after farmers and the like for defaults of small amounts, borrowers of big sums of money seem to go unscathed.
Defaulters of sums above Rs 50 crores were given high concessions in the name of one-time settlement, and were offered interest waivers and several other benefits. Their names were protected from disclosure in order to secure their reputation. The CIC order said that under the RTI Act the government was bound to publish all relevant facts and disclose the rationale behind policy formation in such matters.
When the RBI withheld information sought by the RTI, the apex court ordered it to honour the RTI order. Last Friday’s warning by the court was in continuation of the same process to make the central bank change its stance on disclosures of willful defaulters. The fact that the non-performing- assets of public sector banks had reached dire proportions on March 31 last year, these were 11.6 per cent of total advances – further added a sharp edge to the debate on disclosures of willful defaulters.
As per the RBI’s own definition of a willful defaulter, any borrower who has the capacity to repay the loan but refuses to do so qualifies to be categorised as a willful defaulter. Or when the borrowed funds have been mis-utilised or siphoned off. In that case alone lenders can treat a borrower as a willful defaulter and initiate penal proceedings.
However, publicly disclosing the names of a company, and its directors and associates, which has defaulted in repayment of loan can adversely affect its operations and choke further business activity, and, in extreme situations, cause a change of management.
Factors beyond the control of borrowers such as cyclical sectoral fortunes, accidents, natural causes, etc, cannot be ignored by the lenders while categorising defaulters, the RBI rightly argued. How the to and fro between the central bank and the apex court can be resolved is unclear, but we do believe that treating all borrowers with the same black brush of taint will be unfair and unjust, and ignore the business cycles and other factors beyond the control of borrowers.
The CIC order reflects the commonplace mentality of ‘every businessman being a chor’ while it was expected that the CIC would take a more nuanced view of the matter rather than swayed by the sheer arrogance of its omnibus powers. Public authorities when playing to the gallery tend to sidestep a fair and holistic view of things.
