Explained: The Supreme Court’s rap on the RBI

New Delhi, Apr 27: The Supreme Court granted (Reserve Bank of India) RBI "last opportunity" to withdraw its policy exempting the central bank from disclosing information, like annual inspection report on lenders, under the transparency law and cautioned that future violations would be "viewed seriously".

The top court made it clear that RBI was "duty bound to furnish all information relating to inspection reports and other material" under the Right to Information (RTI) Act except those which pertained to "matters of national economic interest".

The RBI undertook before the court that the disclosure policy will be deleted from the web-site.

The annual inspection of banks by RBI ascertains compliance of lenders on various parameters including recognition of Non Performing Assets (NPAs) or bad loans, capital framework and risk management. Based on the annual inspection, weaknesses are flagged to the banks for taking corrective action.

A bench of Justices L Nageswara Rao and M R Shah took strong note of the fact that RBI acted in contravention of its December 16, 2015 judgement and issued a new disclosure policy on its web-site on April 12 after it had reserved the verdict on a batch of contempt pleas.

Under the new policy, RBI had directed various departments not to disclose information that was specifically asked to be given by the earlier judgment of the top court.

"The Respondents (RBI), in our opinion, have committed contempt of this court by exempting disclosure of material that was directed to be given by this court," the bench said, while granting the last opportunity to the federal bank to rectify it.

"Though we could have taken a serious view of the respondents (RBI) continuing to violate the directions issued by this court, we give them a last opportunity to withdraw the disclosure policy insofar as it contains exemptions which are contrary to the directions issued by this court."

"The Respondents (RBI) are duty bound to furnish all information relating to inspection reports and other material apart from the material that was exempted ...of the judgment. Any further violation shall be viewed seriously by this court," the bench held in its verdict.

Taking serious view of the violation of its verdict, the bench said that there was an element of public policy in punishing civil contempt and "the administration of justice would be undermined if the order of any court of law could be disregarded with impunity".

Extensively referring to the 2015 verdict, it said there was no ambiguity in the judgment which had held that the RBI cannot deny information on the ground that there was a fiduciary relationship between it and the other banks.

"This court stressed the importance of the RTI Act, and held that it is in the interest of the general public that the information sought for by the Respondents therein has to be furnished. There is a specific reference to the inspection reports and the other materials, which were directed to be given ...," it said.

Referring to the earlier verdict, it said that the court was of the opinion that the RBI should act with transparency and not hide information that might embarrass the individual banks and that it is duty bound to comply with the provisions of the RTI Act and disclose the information sought.

"The submission made on behalf of the RBI that the disclosure would hurt the economic interests of the country was found to be totally misconceived," it said.

Taking note of the exemptions from disclosure under the RTI, it said, "the matters of national economic interest, disclosure of information about currency or exchange rates, interest rates, taxes, the regulation or supervision of banking, insurance and other financial institutions, proposals for expenditure or borrowing and foreign investments could in some cases harm the national economy, particularly, if released prematurely."

The verdict had also directed disclosure of lower-level economic and financial information like contracts and departmental budgets.

In January this year, the top court had issued contempt notice to RBI for not disclosing annual inspection report of banks under RTI.

Earlier, the court and the Central Information Commission, both had held that the RBI cannot deny information to an information seeker under the transparency law unless the material is exempted from disclosure under the law.

The RBI, in its defence, had said that it cannot disclose information as the annual inspection report of the bank contained "fiduciary" information as defined under the transparency law.

The Supreme Court had in 2015 held that RBI should take rigid action against those banks and financial institutions which have been indulging in "disreputable business practices" and said it cannot withhold information on defaulters and other issues covered under the RTI Act.

It had further clarified that RBI cannot withhold information under the "guise" of confidence or trust with financial institutions and is accountable to provide information sought by general public.