The Supreme Court’s ultimatum to the Reserve Bank of India to make public the list of wilful loan defaulters under the Right to Information (RTI) Act must be welcomed in the interests of upholding transparency. The central bank has been given “one last opportunity” to change its earlier policy and put it in public domain the information regarding the defaulters and the annual inspection reports of the banks. So far, the RBI has been resisting any attempt to extract the details of defaulters while banks are worried over the potential impact such disclosures will have on their financial stability. The Non-Performing Assets (NPAs), a consequence of reckless lending by banks, has been a huge legacy problem in India. With bad loans touching nearly Rs 11.2 lakh crore in financial year 2018, India has earned the dubious distinction of ranking fifth in the world among nations with high NPAs. The apex court held that the RBI’s non-disclosure policy was in violation of the court’s 2015 judgement asking it to reveal information on defaulters, show-cause notices, action taken reports, audit and inspection reports. There is no valid reason for banks to hide from public the information about frauds eating into the vitals of economy. Since the Supreme Court has already ruled that the RBI is clearly not in any “fiduciary relationship” with any bank, it must honour the court’s directive and uphold citizens’ right to information.
By RBI’s own admission, the NPAs, at the gross level, soared to 11.6% of all advances as on March 31, 2018, from 10.2% in September the previous year. However, it has repeatedly invoked the twin grounds of potential risk to the country’s economic interest and its “fiduciary” relationship with lenders to avoid sharing the information on big defaulters with RTI applicants. Being an independent statutory body, the RBI has a duty to uphold the interests of the depositors at large and the stability of financial sector. Bad loans not only erode faith in regulatory mechanism but also drag down the economy and vitiate investment climate. A wider systemic reform is needed to effectively address the problem of unsustainable lending and to ensure that the future credit cycles will not stress the banking system. It must be pointed out that the Central Information Commission had also directed the RBI to reveal the names of wilful defaulters. It will let citizens know who all had failed to repay loans to the banks. After all, it is the public money that is given to corporate borrowers and bad loans impose a heavy cost on the economy. However, a clear distinction must be made between a genuine promoter pushed into the red for reasons beyond control and a wilful defaulter.