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Banks' confidentiality clauses could be compromised with FDMC

The Reserve Bank of India has been opposing the sharing of such granular data with the FDMC, saying it would be a breach of privacy

The Reserve Bank of India (RBI) is against sharing original granular level that it gets from and other market sources with the proposed Financial Management Centre (FDMC), a 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 driving the RBI’s no-compromise attitude. 

According to people familiar with the matter, the main reason for RBI’s reluctance is the clauses of that the central bank is supposed to upheld. RBI, under normal circumstances, is not obliged to share confidential client information of with anybody (which rule also applies to other collectors).

For example, say those who are familiar with the collection policy, when the Ministry of Corporate Affairs shares its 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 has to adhere to, is when a law enforcement agency has to get particular granular level 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 from the regulators or the Ministry of Corporate Affairs. 

But there could be other exceptions too. 

For example, the in December last year chastised the central bank for its unwillingness to share of defaulters.

is clearly not in any fiduciary relationship with any bank. 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. 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 and regular accounts, experts say the government, as the owner of public sector banks, can have all the it wants from these banks. However, it has only has limited rights over the of private and foreign banks. 

“Why would a private bank and a foreign bank share their client with an agency who would be accessible to all? These 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 they want, then the Act, which has several 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 turf, which may not be a healthy practice. 

“If another agency has the right to collect the same as that done by and then the agency becomes a regulator, then what is for?,” said another person aware of the issue.

raised objections to the clause of allowing access to all kinds of at the last meeting of the Financial Stability and Development Council (FSDC), an inter regulatory and government body, on 29 August. 

The creation of 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 warehouse as a statutory body. However, given 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 and the government to a different level altogether. 

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Business Standard
177 22
Business Standard

Banks' confidentiality clauses could be compromised with FDMC

The Reserve Bank of India has been opposing the sharing of such granular data with the FDMC, saying it would be a breach of privacy

Anup Roy  |  Mumbai 

A photo of RBI headquarters in Mumbai (pic: Kamlesh Pednekar)
RBI headquarters in Mumbai (pic: Kamlesh Pednekar)

The Reserve Bank of India (RBI) is against sharing original granular level that it gets from and other market sources with the proposed Financial Management Centre (FDMC), a 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 driving the RBI’s no-compromise attitude. 

According to people familiar with the matter, the main reason for RBI’s reluctance is the clauses of that the central bank is supposed to upheld. RBI, under normal circumstances, is not obliged to share confidential client information of with anybody (which rule also applies to other collectors).

For example, say those who are familiar with the collection policy, when the Ministry of Corporate Affairs shares its 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 has to adhere to, is when a law enforcement agency has to get particular granular level 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 from the regulators or the Ministry of Corporate Affairs. 

But there could be other exceptions too. 

For example, the in December last year chastised the central bank for its unwillingness to share of defaulters.

is clearly not in any fiduciary relationship with any bank. 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. 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 and regular accounts, experts say the government, as the owner of public sector banks, can have all the it wants from these banks. However, it has only has limited rights over the of private and foreign banks. 

“Why would a private bank and a foreign bank share their client with an agency who would be accessible to all? These 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 they want, then the Act, which has several 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 turf, which may not be a healthy practice. 

“If another agency has the right to collect the same as that done by and then the agency becomes a regulator, then what is for?,” said another person aware of the issue.

raised objections to the clause of allowing access to all kinds of at the last meeting of the Financial Stability and Development Council (FSDC), an inter regulatory and government body, on 29 August. 

The creation of 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 warehouse as a statutory body. However, given 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 and the government to a different level altogether. 

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Banks' confidentiality clauses could be compromised with FDMC

The Reserve Bank of India has been opposing the sharing of such granular data with the FDMC, saying it would be a breach of privacy

The Reserve Bank of India has been opposing the sharing of such granular data with the FDMC, saying it would be a breach of privacy
The Reserve Bank of India (RBI) is against sharing original granular level that it gets from and other market sources with the proposed Financial Management Centre (FDMC), a 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 driving the RBI’s no-compromise attitude. 

According to people familiar with the matter, the main reason for RBI’s reluctance is the clauses of that the central bank is supposed to upheld. RBI, under normal circumstances, is not obliged to share confidential client information of with anybody (which rule also applies to other collectors).

For example, say those who are familiar with the collection policy, when the Ministry of Corporate Affairs shares its 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 has to adhere to, is when a law enforcement agency has to get particular granular level 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 from the regulators or the Ministry of Corporate Affairs. 

But there could be other exceptions too. 

For example, the in December last year chastised the central bank for its unwillingness to share of defaulters.

is clearly not in any fiduciary relationship with any bank. 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. 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 and regular accounts, experts say the government, as the owner of public sector banks, can have all the it wants from these banks. However, it has only has limited rights over the of private and foreign banks. 

“Why would a private bank and a foreign bank share their client with an agency who would be accessible to all? These 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 they want, then the Act, which has several 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 turf, which may not be a healthy practice. 

“If another agency has the right to collect the same as that done by and then the agency becomes a regulator, then what is for?,” said another person aware of the issue.

raised objections to the clause of allowing access to all kinds of at the last meeting of the Financial Stability and Development Council (FSDC), an inter regulatory and government body, on 29 August. 

The creation of 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 warehouse as a statutory body. However, given 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 and the government to a different level altogether. 

image
Business Standard
177 22

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