Going forward, the onus is on the banking regulator to secure public interest in checking the defects of banks to prevent financial scandals and corruption in public and private banks, he adds.
Experts say the apex court order has made it clear that the RTI Act
gets precedence over all other Acts, including the RBI Act. “The only exceptions are those carved out in Section 8 of the RTI Act, which lists out various cases/circumstances in which a public authority need not disclose the information sought for,” says L Charanya, partner, Lakshmikumaran & Sridharan.
The RBI has sought to deny information regarding various banks on the ground that the disclosure would affect the economic interest of the country, competitive advantage of banks and also that the information being sought has been obtained by the regulator in its fiduciary capacity with banks. The apex court, however, rejected the argument that there is a fiduciary relationship between the RBI and its subject.
Experts expect the RBI’s legal team to put under closer scrutiny Section 8 of the RTI Act.
“However, what falls within the ambit of Section 8 of the RTI Act
is a matter of discussion,” says Nishant Singh, partner at IndusLaw.
What may influence the RBI’s Disclosure Policy is the apex court’s observation that “lower-level economic and financial information like contracts and departmental budgets should not be withheld under this exemption” he adds.
Rajeev Dewal, a banking sector legal expert, is of the view that the regulator may need to rework its communications strategy and the language used in bank inspection reports and other communications with banks.
Access to such reports by the public may pose challenges to banks if such reports and communications are used without sound contextual understanding, he adds.
The regulator's reports and communications with its subject should be more fact-based, justifiable and exact, and avoid vague and wide observations or remarks, feels Dewal.
Legal experts agree that the direction of the Supreme Court
is premised on the idea of transparency and accountability. “This certainly will boost accountability and transparency since the RBI now has no other alternative,” says Vijay Sondhi, partner, L&L Partners.
Caught in the crosshairs
The Supreme Court’s judgment on April 26 is the result of contempt petitions filed in relation with alleged disobedience of the directions issued by the court to the RBI
This pertains to the SC’s judgment (on Dec 16, 2015) in RBI vs Jayantilal N Mistry on whether the information sought under the RTI Act can be denied by the RBI and other banks on the ground of economic interest, commercial confidence, fiduciary relationship and public interest
The SC held that there is no fiduciary relationship between the RBI and its subjects
The way forward
The RBI’s Disclosure Policy has to undertake a stress test on its legal validity against the RTI Act
The RBI has to proactively disseminate information, not only in compliance with the requirements of the RTI Act but also with the objective of achieving better corporate governance through higher levels of transparency and accountability
The banking regulator has to ensure confidentiality of sensitive information and avoid disclosures that may lead to a violation of privacy