The Supreme Court of India has pulled up Reserve Bank of India and gave it “last chance” to provide information to the public under the Right to Information Act on bank defaulters. In way back in 2015 the Supreme Court ruled Reserve Bank would have to reveal information under the Right to Information Act on defaulters consisting show cause notices, action taken reports, audit and inspection reports and fines on banks.
Two RBI activists Girish Mittal and SC Agrawal sought information on bank defaulters and in its 2015 decision the RBI was bound to furnish it. In 2015 the RBI said that it could not disclose such information under the secrecy of bank rules and practices was not accepted by the Supreme Court and the Central Right to Information Commission.
The Supreme Court warned the Reserve Bank that it was giving last chance and would take serious view if such information was not provided. The Central Right to Information Commission to review its policy pertaining to bank information.
Since long it had been the working of banks to maintain secrecy of customers accounts and all financial dealing and not to disclosure it to anyone. But recently in Vijay Mallya and other defaulters cases the bank executives grossly misused their provision of secrecy of account indulging in massive corruption, violated norms and rules of granting loans. The RBI also do not seek such information from the banks.
But now the Reserve Bank has also directed all the banks to must divulge loan information on its balance sheets. The RBI has asked the banks to disclose how much they have lent and how much of it have it provided for. The move will force to set aside part of their earnings as there is strong likelihood of losing some of their money.
Recently there were many cases that banks as if in panic declared a loan as NPA even if the borrowers were late by few days.
The National Company Law Tribunal has directed the bank not to classify loan to IL and FS as NPA without seeking prior approval from the Tribunal. The Government appointed Board of IL, FS has indicated that there would be losses pointing out that nearly 90 per cent of the amount lent by IL FS financial services has turned into NPA of lending banks. The 348 group companies have debt of Rs.94,000 crores of which Rs.54,000 crores come from bank.
The strict provision in the Insolvency Act have helped in improving recovery positions in bank. It is said that like crimes have become profession similarly it became practice to take loan from the banks and not to bother to repay it. Now this trend and mentality are being reversed for healthy banking system.