The Chief Information Commissioner under the Right to Information (RTI) Act has asked the Reserve Bank of India (RBI) to explain why it is not willing to make public the list of loan defaulters.
The RBI has been taking shelter under the archaic law that there is a fiduciary relationship between a bank and its debtor so much so that any disclosure about his loan status would amount to this sacred relationship. TouchÃ©. Why this line of reasoning invites anger and derision in equal measures is the wrong understanding of a fiduciary relationship.
There is a fiduciary relationship between a doctor and patient so much so he cannot go public with the ailments of his patents without their consent but subject to a caveat"in public interest to health authorities on outbreak of an epidemic. But banker-borrower relationship confers only a restricted protection against making public. Thus while a bank cannot reveal the expansion or diversification plans of its borrower, it cannot coddle a defaulter. The two situations are entirely different.
A Chartered Accountant cannot similarly disclose the financial secrets of his client but the company law casts him in the role of first among the whistleblowers. Only an advocate has a greater scope for coddling his client but it is a settled law that if his client is planning to plot against the nation or national interest, the fig leaf of fiduciary relationship gets blown over.
For too long, shibboleths have been latched onto with alacrity"watchdog not bloodhound escape route by auditors and the bogey of fiduciary relationship by the RBI. It is time they were wrenched away. The archaic law must be rewritten to disabuse the wrong impression hobbling the RBI from naming and shaming defaulters.
Incidentally, one shibboleth has already been blown away. Banks earlier got away without disclosing provision for bad debts by adding it to some other expenses but no longer.
Raghuram Rajan, the former RBI governor, claims to have given in 2015 a list of loan defaulters to the Prime Minister's office, implying thereby that by doing so he had discharged his duty to public. He should have gone the whole hog"publishing the list.
The Supreme Court too. should have published the names of loan defaulters given to it in a sealed envelope especially after averring that the RBI cannot hold back this vital information from public. That would have made the RBI look sheepish.
While the contents of Income Tax returns aren't meant for public consumption, the Central Board for Direct Taxes (CBDT) rightly makes it bold to name and shame tax defaulters despite knowing they are too thick skinned to lose sleep in its wake. The distinction between the two situations has dawned on the CBDT.
While contents of one's tax return cannot be allowed to become a source of salacious and voyeuristic gossip, tax default is altogether a different kettle of fish. Unfortunately, this seminal distinction hasn't dawned on the RBI. The Ahmedabad Municipal Corporation goes to town beating drums to name and shame a property tax defaulter bang in front of his house.
The RBI according to advocate Prashant Bhushan (NDTV panel discussion of 5 November 2018) is guilty of being in contempt of court for wilful non-compliance of its order. One hopes better sense prevails and the RBI tells the public what they ought to know. It is one thing to give a helping hand to a defaulter facing genuine difficulties but entirely different to protect him from public censure.
(The author is a senior columnist and tweets @smurlidharan)