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RBI’s reluctance to furnish list of wilful defaulters (Relevant for GS Prelims & Mains Paper III; Economics)

Supreme Court directions to RBI
The Reserve Bank of India has been given a “last opportunity” by the Supreme Court to stop being in “contempt” of the court’s order of December 2015. Ruling on a batch of contempt petitions against the RBI, a two-judge bench directed it to furnish all information relating to inspection reports and other material sought by Right to Information (RTI) petitioners, save material exempted by the court’s earlier order particularly on the grounds that it had a bearing on the security of the state. The bench made it clear that “any further violation shall be viewed seriously”.

What has been the attitude of RBI?
The banking regulator has repeatedly tried to stonewall multiple requests seeking information ranging from the names of wilful defaulters on bank loans worth hundreds of crores of rupees, to the bank-wise breakup of losses.

Central Information Commission order
The Central Information Commission too had, in November, directed the then RBI Governor, Urjit Patel, to show cause “why maximum penalty should not be imposed on him” for the central bank’s “defiance” of Supreme Court orders on disclosing the names of wilful loan defaulters.

The RBI was accused off by the CIC for failing to uphold the interest of the public and not fulfilling its statutory duty to depositors, the economy and the banking sector, by privileging individual banks’ interests over its obligation to ensure transparency.

RBI needs to ensure transparency
At a time when the level of bad loans at commercial banks continues to remain worryingly high, worsening their combined capital to risk-weighted assets ratio (CRAR), it is inexcusable that the RBI continues to keep the largest lenders to banks, the depositors, and the public in the dark on the specific loan accounts that are endangering the banking system’s health and viability. The RBI’s latest Financial Stability Report shows that the industry-wide CRAR slid to 13.7% in September 2018, from 13.8% in March 2018, with the ratio at the crucial public sector banks declining more sharply to 11.3%, from 11.7% over the same period.

For a banking regulator that never tires of stressing the need for greater accountability from the numerous public sector banks, the RBI’s reluctance to be more transparent is perplexing. As the CIC aptly observed last year, the central bank’s intransigence and repeated failure to honour the court’s orders ultimately undermines the very rule of law it seeks to enforce as a banking sector regulator empowered by Parliament.

(Adapted From The Hindu)



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