The Reserve Bank of India (RBI) is against sharing original granular level data
that it gets from banks
and other market sources with the proposed Financial Data
Management Centre (FDMC), a data
warehousing company that will act as a central repository of information on all financial entity.
While some has ascribed the central bank’s reticence to a turf war to maintain its position as the premier regulatory body in the country, a closer look suggests issues of data privacy
driving the RBI’s no-compromise attitude.
According to people familiar with the matter, the main reason for RBI’s reluctance is the confidentiality
clauses of banks
that the central bank is supposed to upheld. RBI, under normal circumstances, is not obliged to share confidential client information of banks
with anybody (which rule also applies to other data
For example, say those who are familiar with the data
collection policy, when the Ministry of Corporate Affairs shares its data
with other regulators, it does so after omitting the names of the individual companies. The data, more often than not, is for research and analysis purposes for the regulators to take a call on the economic health of the country.
The only exception to this rule, which even the RBI
has to adhere to, is when a law enforcement agency has to get particular granular level data
on an individual company for investigation purpose.
However, as per the procedure, the investigative agency then has to approach the Court first to get an order to request the data
from the regulators or the Ministry of Corporate Affairs.
But there could be other exceptions too.
For example, the Supreme Court
in December last year chastised the central bank for its unwillingness to share data
is clearly not in any fiduciary relationship with any bank. RBI
has no legal duty to maximize the benefit of any public sector or private sector bank, and thus there is no relationship of ‘trust’ between them. RBI
has a statutory duty to uphold the interest of the public at large, the depositors, the country’s economy and the banking sector,” said a bench of the Supreme Court.
Although there is a clear distinction between wilful defaulters
and regular accounts, experts say the government, as the owner of public sector banks, can have all the data
it wants from these banks. However, it has only has limited rights over the data
of private and foreign banks.
“Why would a private bank and a foreign bank share their client data
with an agency who would be accessible to all? These banks
can easily contest the government’s willingness to pry on their private data,” said a person familiar with the matter.
If the government or any other bodies have to access all the data
they want, then the RBI
Act, which has several confidentiality
clauses, have to be amended. And that would be a complete collapse of RBI’s autonomy, say experts.
Besides, there is a genuine concern about overstepping on RBI
turf, which may not be a healthy practice.
“If another agency has the right to collect the same data
as that done by RBI
and then the agency becomes a regulator, then what is RBI
for?,” said another person aware of the issue.
raised objections to the clause of allowing FDMC
access to all kinds of data
at the last meeting of the Financial Stability and Development Council (FSDC), an inter regulatory and government body, on 29 August.
The creation of FDMC
was first discussed by the Financial Sector Legislative Reforms Commission (FSLRC) in 2014, while the Union Budget earlier this year first proposed to create the data
warehouse as a statutory body. However, given RBI
opposition to the idea, the government could be in mood to upgrade the statutory body into a full-fledged regulatory body.
This, then, could take the dispute between the RBI
and the government to a different level altogether.