On Wednesday, in a sealed envelope, the Reserve Bank of India (RBI) submitted the list of big loan defaulters (companies with over Rs 500 crore bad loans) in the Supreme Court. The RBI did so after the apex court, on 16 February, demanded the list in connection with a PIL filed by Prashant Bhushan-headed NGO, Centre for Public Interest Litigation.The SC, in February, had observed that ‘the RBI is supposed to uphold public interest and not the interest of individual banks,’ nor the central bank is in ‘any fiduciary relationship with any bank.’ But, while submitting the list, the RBI said disclosing the names in public would hamper the companies’ health if they are in genuine difficulty and ‘may accentuate the failure of business rather than nursing it back to health.’
This raises an important question: Who deserves RBI’s loyalty first–the common public or banks/big corporates? The answer is both and, largely, the former.
As the SC correctly observed, theoretically, the central bank ‘has no legal duty to maximise the benefit of any public sector or private sector bank, and thus there is no relationship of ‘trust’ between them.’ The central bank’s statutory duty is tilted towards upholding the interest of the public at large — the depositors, the country’s economy and the banking sector — and not a few large corporates who failed to pay back the money borrowed from banks. And hence naming the defaulters will in fact serve the interests of both the bank and the company. It is in this context that the SC says that the RBI ‘ought to act with transparency and not hide information that might embarrass individual banks’. But, the issue here is a bit more complicated than theory.
2015 Kashmir Despatch